\ 0 (Sºº - C_ 109TH CONGRESS REPORT 2d Session HOUSE OF REPRESENTATIVES - 109—378 HEALTH CARE CHOICE ACT OF 2005 FEBRUARY 16, 2006.--Ordered to be printed Mr. BARTON of Texas, from the Committee on Energy and Commerce, submitted the following R E P O R. T together with DISSENTING VIEWS [To accompany H.R. 2355] [Including cost estimate of the Congressional Budget Office] The Committee on Energy and Commerce, to whom was referred the bill (H.R. 2355) to amend the Public Health Service Act to pro- vide for cooperative governing of individual health insurance cov- erage offered in interstate commerce, having considered the same, report favorably thereon with an amendment and recommend that the bill as amended do pass. CONTENTS - Page Amendment .............................................................................................................. 2 Purpose and Summary ............................................................................................ 9 Background and Need for Legislation .................................................................... 9 Hearings ................................................................................................................... 10 Committee Consideration ........................................................................................ 10 Committee Votes ...................................................................................................... 10 Committee Oversight Findings ............................................................................... 27 Statement of General Performance Goals and Objectives .................................... 27 New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 27 Committee Cost Estimate ....................................................................................... 27 Congressional Budget Office Estimate ................................................................... 27 Federal Mandates Statement ................................................................................. 33 Advisory Committee Statement .............................................................................. 33 Constitutional Authority Statement ...................................................................... 34 Applicability to Legislative Branch ........................................................................ 34 Section-by-Section Analysis of the Legislation ...................................................... 34 Changes in Existing Law Made by the Bill, as Reported ..................................... 38 Dissenting Views ..................................................................................................... 49 49–006 ----> * . . . . . . . . . * tº of whichigan -- **- Documents i. ſº º ºf nº : * -. ; * & 4. . . . . : £enter : à -- i 2 AMENDMENT The amendment is as follows: Strike all after the enacting clause and insert the following: SECTION 1. SHORT TITLE. This Act may be cited as “Health Care Choice Act of 2005”. SEC. 2. SPECIFICATION OF CONSTITUTIONAL AUTHORITY FOR ENACTMENT OF LAW. This Act is enacted pursuant to the power granted Congress under article I, sec- tion 8, clause 3, of the United States Constitution. SEC. 3. FINDINGS. Congress finds the following: (1) The application of numerous and significant variations in State law im- pacts the ability of insurers to offer, and individuals to obtain, affordable indi- vidual health insurance coverage, thereby impeding commerce in individual health insurance coverage. (2) Individual health insurance coverage is increasingly offered through the Internet, other electronic means, and by mail, all of which are inherently part of interstate commerce. (3) In response to these issues, it is appropriate to encourage increased effi- ciency in the offering of individual health insurance coverage through a collabo- rative approach by the States in regulating this coverage. (4) The establishment of risk-retention groups has provided a successful model for the sale of insurance across State lines, as the acts establishing those gº allow insurance to be sold in multiple States but regulated by a single tate. SEC. 4. COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE COVERAGE. (a) IN GENERAL.—Title XXVII of the Public Health Service Act (42 U.S.C. 300gg et seq.) is amended by adding at the end the following new part: “PART D—COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE COVERAGE “SEC. 2795. DEFINITIONS. “In this part: “(1) PRIMARY STATE.—The term ‘primary State’ means, with respect to indi- vidual health insurance coverage offered by a health insurance issuer, the State designated by the issuer as the State whose covered laws shall govern the health insurance issuer in the sale of such coverage under this part. An issuer, with respect to a particular policy, may only designate one such State as its pri- mary State with respect to all such coverage it offers. Such an issuer may not change the designated primary State with respect to individual health insur- ance coverage once the policy is issued, except that such a change may be made upon renewal of the policy. With respect to such designated State, the issuer is deemed to be doing business in that State. “(2) SECONDARY STATE.-The term ‘secondary State’ means, with respect to in- dividual health insurance coverage offered by a health insurance issuer, any State that is not the primary State. In the case of a health insurance issuer that is selling a policy in, or to a resident of, a secondary State, the issuer is deemed to be doing business in that secondary State. “(3) HEALTH INSURANCE ISSUER.—The term ‘health insurance issuer' has the meaning given such term in section 2791(b)(2), except that such an issuer must be licensed in the primary State and be qualified to sell individual health insur- ance coverage in that State. “(4) INDIVIDUAL HEALTH INSURANCE COVERAGE.-The term “individual health insurance coverage' means health insurance coverage offered in the individual market, as defined in section 2791(e)(1). “(5) APPLICABLE STATE AUTHORITY.-The term ‘applicable State authority’ means, with respect to a health insurance issuer in a State, the State insurance commissioner or official or officials designated by the State to enforce the re- quirements of this title for the State with respect to the issuer. “(6) HAZARDOUS FINANCIAL CONDITION.—The term ‘hazardous financial condi- tion’ means that, based on its present or reasonably anticipated financial condi- tion, a health insurance issuer is unlikely to be able— “(A) to meet obligations to policyholders with respect to known claims and reasonably anticipated claims; or “(B) to pay other obligations in the normal course of business. “(7) COVERED LAWS.— 3 “(A) IN GENERAL.—The term ‘covered laws’ means the laws, rules, regula- tions, agreements, and orders governing the insurance business pertaining “(i) individual health insurance coverage issued by a health insurance 1SSuer; “(ii) the offer, sale, rating (including medical underwriting), renewal, and issuance of individual health insurance coverage to an individual; “(iii) the provision to an individual in relation to individual health in- surance coverage of health care and insurance related services; “(iv) the provision to an individual in relation to individual health in- surance coverage of management, operations, and investment activities of a health insurance issuer; and “(v) the provision to an individual in relation to individual health in- surance coverage of loss control and claims administration for a health insurance issuer with respect to liability for which the issuer provides insurance. “(B) EXCEPTION.—Such term does not include any law, rule, regulation, agreement, or order governing the use of care or cost management tech- niques, including any requirement related to provider contracting, network access or adequacy, health care data collection, or quality assurance. “(8) STATE.—The term ‘State’ means only the 50 States and the District of Co- lumbia. “(9) UNFAIR CLAIMS SETTLEMENT PRACTICES.—The term ‘unfair claims settle- ment practices' means only the following practices: “(A) Knowingly misrepresenting to claimants and insured individuals rel- evant facts or policy provisions relating to coverage at issue. “(B) Failing to acknowledge with reasonable promptness pertinent com- munications with respect to claims arising under policies. “(C) Failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims arising under policies. “(D) Failing to effectuate prompt, fair, and equitable settlement of claims submitted in which liability has become reasonably clear. “(E) Refusing to pay claims without conducting a reasonable investiga- tion. “(F) Failing to affirm or deny coverage of claims within a reasonable pe- riod of time after having completed an investigation related to those claims. “(G) A pattern or practice of compelling insured individuals or their bene- ficiaries to institute suits to recover amounts due under its policies by offer- ing substantially less than the amounts ultimately recovered in suits brought by them. “(H) A pattern or practice of attempting to settle or settling claims for less than the amount that a reasonable person would believe the insured individual or his or her beneficiary was entitled by reference to written or printed advertising material accompanying or made part of an application. “(I) Attempting to settle or settling claims on the basis of an application that was materially altered without notice to, or knowledge or consent of, the insured. “(J) Failing to provide forms necessary to present claims within 15 cal- endar days of a requests with reasonable explanations regarding their use. “(K) Attempting to cancel a policy in less time than that prescribed in the policy or by the law of the primary State. “(10) FRAUD AND ABUSE.-The term ‘fraud and abuse’ means an act or omis- sion committed by a person who, knowingly and with intent to defraud, com- mits, or conceals any material information concerning, one or more of the fol- lowing: “(A) Presenting, causing to be presented or preparing with knowledge or belief that it will be presented to or by an insurer, a reinsurer, broker or its agent, false information as part of, in support of or concerning a fact ma- terial to one or more of the following: “(i) An application for the issuance or renewal of an insurance policy or reinsurance contract. “(ii) The rating of an insurance policy or reinsurance contract. “(iii) A claim for payment or benefit pursuant to an insurance policy or reinsurance contract. “(iv) Premiums paid on an insurance policy or reinsurance contract. “(v) Payments made in accordance with the terms of an insurance policy or reinsurance contract. “(vi) A document filed with the commissioner or the chief insurance regulatory official of another jurisdiction. 4 “(vii) The financial condition of an insurer or reinsurer. “(viii) The formation, acquisition, merger, reconsolidation, dissolution or withdrawal from one or more lines of insurance or reinsurance in all or part of a State by an insurer or reinsurer. “(ix) The issuance of written evidence of insurance. “(x) The reinstatement of an insurance policy. “(B) Solicitation or acceptance of new or renewal insurance risks on be- half of an insurer reinsurer or other person engaged in the business of in- surance by a person who knows or should know that the insurer or other person responsible for the risk is insolvent at the time of the transaction. “(C) Transaction of the business of insurance in violation of laws requir- ing a license, certificate of authority or other legal authority for the trans- action of the business of insurance. “(D) Attempt to commit, aiding or abetting in the commission of, or con- spiracy to commit the acts or omissions specified in this paragraph. “SEC. 2796. APPLICATION OF LAW. “(a) IN GENERAL-The covered laws of the primary State shall apply to individual health insurance coverage offered by a health insurance issuer in the primary State and in any secondary State, but only if the coverage and issuer comply with the con- gº of this section with respect to the offering of coverage in any secondary tate. “(b) EXEMPTIONS FROM COVERED LAWS IN A SECONDARY STATE.—Except as pro- vided in this section, a health insurance issuer with respect to its offer, sale, rating (including medical underwriting), renewal, and issuance of individual health insur- ance coverage in any secondary State is exempt from any covered laws of the sec- ondary State (and any rules, regulations, agreements, or orders sought or issued by ...state under or related to such covered laws) to the extent that such laws WOULLCI- “(1) make unlawful, or regulate, directly or indirectly, the operation of the health insurance issuer operating in the secondary State, except that any sec- ondary State may require such an issuer— “(A) to pay, on a nondiscriminatory basis, applicable premium and other taxes (including high risk pool assessments) which are levied on insurers §. surplus lines insurers, brokers, or policyholders under the laws of the tate; “(B) to register with and designate the State insurance commissioner as its agent solely for the purpose of receiving service of legal documents or process; “(C) to submit to an examination of its financial condition by the State insurance commissioner in any State in which the issuer is doing business to determine the issuer's financial condition, if— “(i) the State insurance commissioner of the primary State has not done an examination within the period recommended by the National Association of Insurance Commissioners; and “(ii) any such examination is conducted in accordance with the exam- iners’ handbook of the National Association of Insurance Commis- sioners and is coordinated to avoid unjustified duplication and unjusti- fied repetition; “(D) to comply with a lawful order issued— “(i) in a delinquency proceeding commenced by the State insurance commissioner if there has been a finding of financial impairment under subparagraph (C); or “(ii) in a voluntary dissolution proceeding; “(E) to comply with an injunction issued by a court of competent jurisdic- tion, upon a petition by the State insurance commissioner alleging that the issuer is in hazardous financial condition; “(F) to participate, on a nondiscriminatory basis, in any insurance insol- vency guaranty association or similar association to which a health insur- ance issuer in the State is required to belong; “(G) to comply with any State law regarding fraud and abuse (as defined in section 2795(10)), except that if the State seeks an injunction regarding the conduct described in this subparagraph, such injunction must be ob- tained from a court of competent jurisdiction; “(H) to comply with any State law regarding unfair claims settlement practices (as defined in section 2795(9)); or “(I) to comply with the applicable requirements for independent review under section 2798 with respect to coverage offered in the State; 5 “(2) require any individual health insurance coverage issued by the issuer to be countersigned by an insurance agent or broker residing in that Secondary State; or “(3) otherwise discriminate against the issuer issuing insurance in both the primary State and in any secondary State. “(c) CLEAR AND CONSPICUOUS DISCLOSURE.-A health insurance issuer shall pro- vide the following notice, in 12-point bold type, in any insurance coverage offered in a secondary State under this part by such a health insurance issuer and at re- newal of the policy, with the 5 blank spaces therein being appropriately filled with the name of the health insurance issuer, the name of primary State, the name of the secondary State, the name of the secondary State, and the name of the sec- ondary State, respectively, for the coverage concerned: “Notice “This policy is issued by and is governed by the laws and regu- lations of the State of , and it has met all the laws of that State as determined by that State’s Department of Insurance. This policy may be less expensive than others because it is not subject to all of the insurance laws and regulations of the State of , including coverage of some services or benefits mandated by the law of the State of . Addi- tionally, this policy is not subject to all of the consumer protection laws or restrictions on rate changes of the State of . As with all insurance products, before purchasing this policy, you should carefully review the policy and determine what health care services the policy covers and what benefits it provides, including any exclusions, limitations, or conditions for such services or benefits.”. “(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS AND PREMIUM INCREASES.— “(1) IN GENERAL.—For purposes of this section, a health insurance issuer that provides individual health insurance coverage to an individual under this part in a primary or secondary State may not upon renewal— “(A) move or reclassify the individual insured under the health insurance coverage from the class such individual is in at the time of issue of the con- tract based on the health-status related factors of the individual; or “(B) increase the premiums assessed the individual for such coverage based on a health status-related factor or change of a health status-related factor or the past or prospective claim experience of the insured individual. “(2) CONSTRUCTION.—Nothing in paragraph (1) shall be construed to prohibit a health insurance issuer— “(A) from terminating or discontinuing coverage or a class of coverage in accordance with subsections (b) and (c) of section 2742; “(B) from raising premium rates for all policy holders within a class based on claims experience; “(C) from changing premiums or offering discounted premiums to individ- uals who engage in wellness activities at intervals prescribed by the issuer, if such premium changes or incentives— “(i) are disclosed to the consumer in the insurance contract; “(ii) are based on specific wellness activities that are not applicable to all individuals; and º are not obtainable by all individuals to whom coverage is of fered; “(D) from reinstating lapsed coverage; or “(E) from retroactively adjusting the rates charged an insured individual if the initial rates were set based on material misrepresentation by the in- dividual at the time of issue. “(e) PRIOR OFFERING OF POLICY IN PRIMARY STATE.—A health insurance issuer may not offer for sale individual health insurance coverage in a secondary State un- less that coverage is currently offered for sale in the primary State. “(f) LICENSING OF AGENTS OR BROKERS FOR HEALTH INSURANCE ISSUERS.—Any State may require that a person acting, or offering to act, as an agent or broker for a health insurance issuer with respect to the offering of individual health insur- ance coverage obtain a license from that State, with commissions or other com- pensation subject to the provisions of the laws of that State, except that a State may not impose any qualification or requirement which discriminates against a non- resident agent or broker. “(g) DOCUMENTS FOR SUBMISSION TO STATE INSURANCE COMMISSIONER.—Each health insurance issuer issuing individual health insurance coverage in both pri- mary and secondary States shall submit— 6 “(1) to the insurance commissioner of each State in which it intends to offer §. coverage, before it may offer individual health insurance coverage in such tate— “(A) a copy of the plan of operation or feasibility study or any similar statement of the policy being offered and its coverage (which shall include the name of its primary State and its principal place of business); “(B) written notice of any change in its designation of its primary State; “(C) written notice from the issuer of the issuer's compliance with all the laws of the primary State; and “(2) to the insurance commissioner of each secondary State in which it offers individual health insurance coverage, a copy of the issuer's quarterly financial statement submitted to the primary State, which statement shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by— “(A) a member of the American Academy of Actuaries; or “(B) a qualified loss reserve specialist. “(h) POWER OF COURTS TO ENJOIN CONDUCT-Nothing in this section shall be construed to affect the authority of any Federal or State court to enjoin— “(1) the solicitation or sale of individual health insurance coverage by a health insurance issuer to any person or group who is not eligible for such insurance; “(2) the Solicitation or sale of individual health insurance coverage that vio- lates the requirements of the law of a secondary State which are described in subparagraphs (A) through (H) of section 2796(b)(1). “(i) POWER OF SECONDARY STATES TO TAKE ADMINISTRATIVE ACTION.—Nothing in this section shall be construed to affect the authority of any State to enjoin conduct in violation of that State's laws described in section 2796(b)(1). “(j) STATE POWERS TO ENFORCE STATE LAWS.— “(1) IN GENERAL.—Subject to the provisions of subsection (b)(1)(G) (relating to injunctions) and paragraph (2), nothing in this section shall be construed to af- fect the authority of any State to make use of any of its powers to enforce the laws of such State with respect to which a health insurance issuer is not ex- empt under subsection (b). “(2) COURTS OF COMPETENT JURISDICTION.—If a State seeks an injunction re- garding the conduct described in paragraphs (1) and (2) of subsection (h), such injunction must be obtained from a Federal or State court of competent jurisdic- tion. “(k) STATES AUTHORITY TO SUE.—Nothing in this section shall affect the authority of any State to bring action in any Federal or State court. “(1) GENERALLY APPLICABLE LAWS.—Nothing in this section shall be construed to affect the applicability of State laws generally applicable to persons or corporations. “(m) GUARANTEED AVAILABILITY OF COVERAGE TO HIPAA ELIGIBLE INDIVIDUALS.— To the extent that a health insurance issuer is offering coverage in a primary State that does not accommodate residents of secondary States or does not provide a working mechanism for residents of a secondary State, and the issuer is offering coverage under this part in such secondary State which has not adopted a qualified high risk pool as its acceptable alternative mechanism (as defined in section 2744(c)(2)), the issuer shall, with respect to any individual health insurance cov- erage offered in a secondary State under this part, comply with the guaranteed availability requirements for eligible individuals in section 2741. “SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR BEFORE ISSUER MAY SELL INTO SECONDARY STATES. “A health insurance issuer may not offer, sell, or issue individual health insurance coverage in a secondary State if the State insurance commissioner does not use a risk-based capital formula for the determination of capital and surplus requirements for all health insurance issuers. “SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCEDURES. “(a) RIGHT TO EXTERNAL APPEAL.-A health insurance issuer may not offer, sell, or issue individual health insurance coverage in a secondary State under the provi- sions of this title unless— “(1) both the secondary State and the primary State have legislation or regu- lations in place establishing an independent review process for individuals who are covered by individual health insurance coverage, or “(2) in any case in which the requirements of subparagraph (A) are not met with respect to the either of such States, the issuer provides an independent review mechanism substantially identical (as determined by the applicable State authority of such State) to that prescribed in the “Health Carrier External 7 Review Model Act' of the National Association of Insurance Commissioners for all individuals who purchase insurance coverage under the terms of this part, except that, under such mechanism, the review is conducted by an independent medical reviewer, or a panel of such reviewers, with respect to whom the re- quirements of subsection (b) are met. “(b) QUALIFICATIONS OF INDEPENDENT MEDICAL REVIEWERS.–In the case of any independent review mechanism referred to in subsection (a)(2)— “(1) IN GENERAL.—In referring a denial of a claim to an independent medical reviewer, or to any panel of such reviewers, to conduct independent medical re- view, the issuer shall ensure that— “(A) each independent medical reviewer meets the qualifications de- scribed in paragraphs (2) and (3); “(B) with respect to each review, each reviewer meets the requirements of paragraph (4) and the reviewer, or at least 1 reviewer on the panel, meets the requirements described in paragraph (5); and “(C) compensation provided by the issuer to each reviewer is consistent with paragraph (6). “(2) LICENSURE AND EXPERTISE.-Each independent medical reviewer shall be a physician (allopathic or osteopathic) or health care professional who— “(A) is appropriately credentialed or licensed in 1 or more States to de- liver health care services; and “(B) typically treats the condition, makes the diagnosis, or provides the type of treatment under review. “(3) INDEPENDENCE.- “(A) IN GENERAL.—Subject to subparagraph (B), each independent med- ical reviewer in a case shall— “(i) not be a related party (as defined in paragraph (7)); “(ii) not have a material familial, financial, or professional relation- ship with such a party; and “(iii) not otherwise have a conflict of interest with such a party (as determined under regulations). “(B) EXCEPTION.—Nothing in subparagraph (A) shall be construed to— “(i) prohibit an individual, solely on the basis of affiliation with the issuer, from serving as an independent medical reviewer if— “(I) a non-affiliated individual is not reasonably available; “(II) the affiliated individual is not involved in the provision of items or services in the case under review; “(III) the fact of such an affiliation is disclosed to the issuer and the enrollee (or authorized representative) and neither party ob- jects; and “(IV) the affiliated individual is not an employee of the issuer and does not provide services exclusively or primarily to or on be- half of the issuer; “(ii) prohibit an individual who has staff privileges at the institution where the treatment involved takes place from serving as an inde- pendent medical reviewer merely on the basis of such affiliation if the affiliation is disclosed to the issuer and the enrollee (or authorized rep- resentative), and neither party objects; or “(iii) prohibit receipt of compensation by an independent medical re- viewer from an entity if the compensation is provided consistent with paragraph (6). “(4) PRACTICING HEALTH CARE PROFESSIONAL IN SAME FIELD.— “(A) IN GENERAL.—In a case involving treatment, or the provision of items or services— “(i) by a physician, a reviewer shall be a practicing physician (allopathic or osteopathic) of the same or similar specialty, as a physi- cian who, acting within the appropriate scope of practice within the State in which the service is provided or rendered, typically treats the condition, makes the diagnosis, or provides the type of treatment under review; or “(ii) by a non-physician health care professional, the reviewer, or at least 1 member of the review panel, shall be a practicing non-physician health care professional of the same or similar specialty as the non- physician health care professional who, acting within the appropriate scope of practice within the State in which the service is provided or rendered, typically treats the condition, makes the diagnosis, or pro- vides the type of treatment under review. “(B) PRACTICING DEFINED.—For purposes of this paragraph, the term ‘practicing' means, with respect to an individual who is a physician or other 8 health care professional, that the individual provides health care services to individual patients on average at least 2 days per week. “(5) PEDIATRIC EXPERTISE.-In the case of an external review relating to a child, a reviewer shall have expertise under paragraph (2) in pediatrics. “(6) LIMITATIONS ON REVIEWER COMPENSATION.—Compensation provided by the issuer to an independent medical reviewer in connection with a review under this section shall— “(A) not exceed a reasonable level; and “(B) not be contingent on the decision rendered by the reviewer. “(7) RELATED PARTY DEFINED.—For purposes of this section, the term ‘related party’ means, with respect to a denial of a claim under a coverage relating to an enrollee, any of the following: “(A) The issuer involved, or any fiduciary, officer, director, or employee of the issuer. “(B) The enrollee (or authorized representative). “(C) The health care professional that provides the items or services in- volved in the denial. “(D) The institution at which the items or services (or treatment) involved in the denial are provided. “(E) The manufacturer of any drug or other item that is included in the items or services involved in the denial. “(F) Any other party determined under any regulations to have a sub- stantial interest in the denial involved. “(8) DEFINITIONS.—For purposes of this subsection: “(A) ENROLLEE.—The term ‘enrollee’ means, with respect to health insur- ance coverage offered by a health insurance issuer, an individual enrolled with the issuer to receive such coverage. “(B) HEALTH CARE PROFESSIONAL.—The term ‘health care professional’ means an individual who is licensed, accredited, or certified under State law to provide specified health care services and who is operating within the scope of such licensure, accreditation, or certification. “SEC. 2799. ENFORCEMENT. “(a) IN GENERAL.—Subject to subsection (b), with respect to specific individual health insurance coverage the primary State for such coverage has sole jurisdiction § enforce the primary State's covered laws in the primary State and any secondary tate. “(b) SECONDARY STATE'S AUTHORITY.-Nothing in subsection (a) shall be construed to affect the authority of a secondary State to enforce its laws as set forth in the exception specified in section 2796(b)(1). “(c) COURT INTERPRETATION.—In reviewing action initiated by the applicable sec- ondary State authority, the court of competent jurisdiction shall apply the covered laws of the primary State. “(d) NOTICE OF COMPLIANCE FAILURE.-In the case of individual health insurance coverage offered in a secondary State that fails to comply with the covered laws of the primary State, the applicable State authority of the secondary State may notify the applicable State authority of the primary State.”. (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to indi- vidual health insurance coverage offered, issued, or sold after the date that is one year after the date of the enactment of this Act. (c) GAO ONGOING STUDY AND REPORTS.— (1) STUDY.-The Comptroller General of the United States shall conduct an ongoing study concerning the effect of the amendment made by subsection (a) OIl- (A) the number of uninsured and under-insured; (B) the availability and cost of health insurance policies for individuals with pre-existing medical conditions; (C) the availability and cost of health insurance policies generally; (D) the elimination or reduction of different types of benefits under health insurance policies offered in different States; and (E) cases of fraud or abuse relating to health insurance coverage offered under such amendment and the resolution of such cases. (2) ANNUAL REPORTS.—The Comptroller General shall submit to Congress an annual report, after the end of each of the 5 years following the effective date of the amendment made by subsection (a), on the ongoing study conducted under paragraph (1). SEC. 5. SEVERABILITY. If any provision of the Act or the application of such provision to any person or circumstance is held to be unconstitutional, the remainder of this Act and the appli- 9 cation of the provisions of such to any other person or circumstance shall not be af. fected. PURPOSE AND SUMMARY The purpose of H.R. 2355, The Health Care Choice Act of 2005, is to allow for cooperative governing of individual health insurance coverage offered in interstate commerce. BACKGROUND AND NEED FOR LEGISLATION States currently impose a variety of different health insurance regulations and benefit mandates that result in premiums that vary widely among states. State policies, such as guaranteed issue, which requires insurers to accept anyone who applies regardless of health status; community rating, which forces insurers to charge every insured person the same premium regardless of age, gender, geographic location, or health status; and benefit mandates, largely dictate the cost of health insurance policy premiums. This can cause large discrepancies between states. Premiums for a health insurance policy for an individual in one state could in many cases be reduced annually by thousands of dollars if that individual were allowed to purchase health insurance in a different state. A January 2005 study by the Council for Affordable Health In- surance (CAHI) concluded that there are currently 1,824 cumu- lative mandates on state health insurers. A 2004 study by eHealthInsurance found monthly premiums varied widely across different states. The eHealthInsurance study found that an insur- ance product for a family with a $2,000 family deductible and 20 percent coinsurance could be obtained in Kansas City, MO, for a monthly premium of $171.86, while that same coverage in Boston, MA, would cost $767.30 a month. Another study conducted by the Maine Heritage Policy Center found that even in neighboring states the costs of health insurance could vary widely. In their analysis of similar health insurance products offered by Anthem Blue Cross Blue Shield in both Maine and New Hampshire, it was found that individual health insurance plans for a 25-year-old male that included a $1,500 deductible with 20 percent co-insurance cost the Maine resident $495.89 a month, while a similar policy cost a 25-year-old New Hampshire resident just $127.65. That is a dif- ference of $368.22 per month or $4,418.64 annually. H.R. 2355 would allow an insurer to designate a primary state whose covered laws would apply to that individual health insur- ance coverage offered by the insurer. It would then allow the in- surer to offer that coverage in any secondary state. H.R. 2355 would exempt a health insurer from the covered laws of the sec- ondary state with respect to the regulation of its insurance prod- ucts. It would also allow secondary states to require an insurer to (1) pay applicable premium and other taxes (including high risk pool assessments) that are levied on insurers under the laws of the state; (2) register with and designate the state insurance commis- sioner as its agent for the purposes of receiving service of legal doc- uments or process; (3) submit to an examination of its financial condition by the state insurance commissioner if the insurance commissioner of the primary state has not done an examination within a period of time recommended by the National Association of Insurance Commissioners (NAIC) and in accordance with its ex- 10 aminer's handbook; (4) comply with a lawful order issued in a vol- untary dissolution proceeding, or in a delinquency proceeding com- menced by the State insurance commissioner where there has been a finding of financial impairment; (5) comply with an injunction issued by a court of competent jurisdiction, upon petition by the state insurance commissioner alleging that the issuer is in haz- ardous financial condition; (6) participate, on a nondiscriminatory basis, in any insurance insolvency guaranty association or similar association to which a health insurance issuer in the state is re- quired to belong; (7) comply with any state law regarding fraud and abuse (as defined in the bill), except that if the state seeks an injunction regarding fraudulent conduct, such an injunction must be obtained from a court of competent jurisdiction; and, (8) comply with any state law regarding unfair claims settlement practices (as defined in the bill). In order to ensure that individuals buying coverage in a sec- ondary state are aware that their policies are subject to the regula- tions of another state, H.R. 2355 requires a health insurer to in- form purchasers in a secondary state that the policy is governed by the laws and regulations of the primary state. The bill would also prohibit insurers from offering health insurance in a secondary state unless that coverage is currently offered for sale in the pri- mary State. HEARINGS The Subcommittee on Health held a hearing on H.R. 2355 on June 28, 2005. The Subcommittee received testimony from: Merrill Matthews, Ph.D., Director, Council for Affordable Health Insurance (CAHI); Robert Garcia de Posada, Chairman/President, The Latino Coalition; Dr. David Gratzer, Senior Fellow, the Manhattan Insti- tute; Mike Kreidler, Washington State Insurance Commissioner, and, Hunter Limbaugh, Chair, Advocacy Committee, American Di- abetes Association. COMMITTEE CONSIDERATION On Wednesday, July 20, 2005, the Full Committee met in open markup session and favorably ordered H.R. 2355, reported to the House, as amended, by a recorded vote of 24 yeas and 23 nays, a quorum being present. COMMITTEE VOTES Clause 3(b) of rule XIII of the Rules of the House of Representa- tives requires the Committee to list the record votes on the motion to report legislation and amendments thereto. The following are the recorded votes taken on amendments offered to the measure, including the names of those Members voting for and against. A motion by Mr. Barton to order H.R. 2355 reported to the House, as amended, was agreed to by a record vote of 24 yeas and 23 nays. 11 COMMITTEE ON ENERGY AND COMMERCE - 109TH CONGRESS ROLL CALL VOTE # 39 Bill: H.R. 2355, Health Care Choice Act of 2005. AMENDMENT: An amendment to the Shadegg amendment by Mr. Waxman, No. 1a, to prohibit an insurer from offering health insurance coverage in a secondary state, unless that secondary state's applicable state authority has approved and certified that the coverage would not adversely affect the state's market for individual health insurance coverage or undermine the benefit and consumer protections in that state. DISPOSITION: NOT AGREED TO, by a roll call vote of 20 yeas to 21 nays. REPRESENTATIVE YEAS NAYS | PRESENT REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingell X Mr. Hall X Mr. Waxman X Mr. Bilirakis X Mr. Markey X Mr. Upton X Mr. Boucher Mr. Stearns X Mr. Towns Mr. Gilimor Mr. Pallone X Mr. Deal X Mr. Brown X Mr. Whitfield Mr. Gordon X Mr. Norwood X Mr. Rush Ms. Cubin X Ms. Eshoo Mr. Shimkus X Mr. Stupak X Ms. Wilson X Mr, Engel Mr. Shadegg X Mr. Wynn X Mr. Pickering Mr. Green X Mr. Fossella X Mr. Strickland X Mr. Blunt Ms. DeGette X Mr. Buyer . X Ms. Capps X Mr. Radanovich X Mr. Doyle X Mr. Bass X Mr. Allen X Mr. Pitts Mr. Davis X Ms. Bono Y Ms. Schakowsky X Mr. Walden X Ms. Solis Mr. Terry X Mr. Gonzalez X Mr. Ferguson Mr. Inslee X Mr. Rogers Ms. Baldwin X Mr. Otter Mr. Ross X Ms. Myrick X Mr. Sullivan Mr. Murphy Mr. Burgess X Ms. Blackburn X 7/20/2005 12 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE # 40 Biłł: H.R. 2355, Health Care Choice Act of 2005, AMENDMENT: An amendment by Mr. Shadegg, No. 1, to (1) clarify that the rating and renewal laws of the secondary State do not apply; (2) to clarify that secondary states can enforce their own laws with regards to issues such as maintaining, establishing or contracting to establish an adequate network of health care providers such as doctors and hospitals; (3) to permit secondary states to requiring an insurer to submit data collection or quality assurance information in accordance with secondary state law; (4) to add several items to the definition of “unfair claims practices”; (5) to permit any secondary state to require insurance agents commissions or other compensation to be subject to the provisions of the laws of that state; (6) to clarify that secondary states may also seek to stop, in a court of law, an insurer that violates any of the laws that the secondary state is allowed to enforce; (7) and, to clarify that insurance companies continue to have a HIPAA group-to-individual portability obligation under H.R. 2355. DISPOSITION: AGREED TO, by a roll call vote of 24 yeas to 17 nays, REPRESENTATIVE YEAS NAYS | PRESENT REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingell X Mr. Hall X Mr. Waxman X Mr. Bilirakis X Mr. Markey X Mr. Upton X Mr. Boucher Mr. Stearns X Mr. Towns Mr. Gillmor X Mr. Pallone Mr. Deal X Mr. Brown X Mr. Whitfield X Mr. Gordon X Mr. Norwood X Mr. Rush Ms. Cubin Ms. Eshoo Mr. Shimkus X Mr. Stupak X Ms. Wilson X Mr. Engel Mr. Shadegg X Mr. Wynn Mr. Pickering X Mr. Green X Mr. Fosseila Mr. Strickland X Mr. Blunt Ms. DeGette X Mr. Buyer Ms. Capps X Mr. Radanovich Mr. Doyle Mr. Bass X Mr. Allen X Mr. Pitts X Mr. Davis Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis X Mr. Terry X Mr. Gonzalez Mr. Ferguson X Mr. Inslee X Mr. Rogers X Ms. Baldwin X Mr. Otter Mr. Ross X Ms. Myrick Mr. Sullivan X Mr. Murphy X Mr. Burgess X Ms. Blackburn X 7/20/2005 13 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE # 41 Bill: H.R. 2355, Health Care Choice Act of 2005. AMENDMENT: An amendment by Mr. Green, No. 2, to prohibit an insurer from offering health insurance DISPOSITION: NOT AGREED TO, by a roll call vote of 18 yeas to 23 nays. coverage in a secondary state unless the legislature of that secondary state has enacted into law a waiver of applicable health insurance regulations, REPRESENTATIVE YEAS NAYS | PRESENT REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingell X Mr. Hall X Mr. Waxman X Mr. Bilirakis X Mr. Markey Mr. Upton X Mr. Boucher Mr. Stearns Mr. Towns Mr. Gillmor X Mr. Pallone X Mr. Deal X Mr. Brown X Mr. Whitfield X Mr. Gordon X Mr. Norwood Mr. Rush X Ms, Cubin Ms. Eshoo Mr. Shimkus X Mr. Stupak Ms. Wilson X Mr. Engel Mr. Shadegg X Mr. Wynn X Mr. Pickering X Mr. Green X Mr. Fossella Mr. Strickland X Mr. Blunt Ms. DeGette X Mr. Buyer X Ms. Capps X Mr. Radanovich X Mr. Doyle X #Mr. Bass X Mr. Allen X Mr. Pitts X Mr. Davis Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis X Mr. Terry X Mr. Gonzalez X Mr. Ferguson Mr. Inslee Mr. Rogers Ms. Baldwin X Mr. Otter X Mr. Ross X Ms. Myrick X Mr. Sullivan X Mr. Murphy X Mr. Burgess X Ms. Blackburn 7/20/2005 14 COMMITTEE ON ENERGY AND COMMERCE - 109TH CONGRESS ROLL CALL VOTE #42 Bill: H.R. 2355, Health Care Choice Act of 2005. AMENDMENT: An amendment by Mr. Brown, No. 3, to prohibit an insurer from offering health insurance coverage in a secondary state unless the issuer also offers health insurance coverage that meets the laws of, and is regulated by, that secondary state, and to require the issuer to attest to the applicable state authority of the secondary state that any premium differential between the offering in the primary state and the offering in the secondary state for the same coverage is attributable only to the actuarial differential between the two offerings. DISPOSITION: NOT AGREED TO, by a roll call vote of 19 yeas to 25 nays. REPRESENTATIVE YEAS NAYS | PRESENT |REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingell X Mr. Hall X Mr. Waxman Mr. Bilirakis X Mr. Markey X Mr. Upton X Mr. Boucher Mr. Stearns Mr. Towns Mr. Gillmor X Mr. Pallone X Mr. Deal X Mr. Brown X Mr. Whitfield X Mr. Gordon Mr. Norwood X Mr. Rush X Ms. Cubin Ms. Eshoo Mr. Shimkus X Mr. Stupak X Ms. Wilson X Mr. Engel Mr. Shadegg X Mr. Wynn X Mr. Pickering X Mr. Green X Mr. Fossella X Mr. Strickland X Mr. Blunt Ms. DeGette X Mr. Buyer X Ms. Capps X Mr. Radanovich X Mr. Doyle X Mr, Bass X Mr. Allen X Mr. Pitts X Mr. Davis Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis X Mr. Terry X Mr. Gonzalez X Mr. Ferguson X Mr. Inslee Mr. Rogers Ms. Baldwin X Mr. Otter X Mr. Ross X Ms. Myrick Mr. Sullivan X Mr. Murphy X Mr. Burgess X Ms. Błackburn X 7/20/2005 15 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE # 43 Bill: H.R. 2355, Health Care Choice Act of 2005. AMENDMENT: An amendment by Ms. DeGette, No. 5, to prohibit an insurer from offering coverage in a DISPOSITION: NOT AGREED TO, by a roll call vote of 23 yeas to 23 nays. secondary state unless it complies with all the laws of the secondary state regarding access to coverage and benefits for individuals with diabetes, REPRESENTATIVE YEAS NAYS | PRESENT REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingell X Mr. Hall X Mr. Waxman Mr. Bilirakis X Mr. Markey X Mr. Upton |X Mr. Boucher Mr. Stearns Mr. Towns Mr. Gillmor X Mr. Pallone X Mr. Deal X Mr. Brown X Mr. Whitfield X Mr. Gordon X Mr. Norwood X Mr. Rush Ms. Cubin Ms. Eshoo X Mr. Shimkus X Mr. Stupak X Ms. Wilson X Mr. Engel X Mr. Shadegg X Mr. Wynn X Mr. Pickering X Mr. Green X Mr. Fosselia Mr. Strickland X Mr. Blunt Ms. DeGette X Mr. Buyer X Ms. Capps X Mr. Radanovich X Mr. Doyle X Mr. Bass X Mr. Ailen X Mr. Pitts Mr. Davis X Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis X Mr. Terry X Mr. Gonzalez X Mr. Ferguson X Mr. Inslee X Mr. Rogers X Ms. Baldwin X Mr. Otter Mr. Ross X Ms. Myrick Mr. Sullivan X Mr. Murphy x Mr. Burgess X Ms. Blackburn X 7/20/2005 16 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE # 44 Bill: H.R. 2355, Health Care Choice Act of 2005. AMENDMENT: An amendment by Mr. Markey, No. 8, to require an insurer to (1) provide an explanation of any variance of the coverage from the mandated benefits, consumer protections, fraud protections, or premium protections that would be provided under the secondary state’s laws and regulations that would not apply; (2) to require a health insurer to notify its policyholders each time it changes its primary state; and, (3) to require a health insurance issuer offering insurance in a secondary state to maintain a website containing copies of each insurance policy form sold in each secondary state, copies of (or links to) the insurance law and regulation used in the primary state, a discussion of the rating approach used by the insurer including whether the rating varies by duration and how it approaches closed blocks of business, and information on how the applicant or policy holder can file a complaint with the applicable state authority of the primary state. DISPOSITION: NOT AGREED TO, by a roll call vote of 19 yeas to 25 nays. REPRESENTATIVE YEAS NAYS | PRESENT REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingell X Mr. Hall X Mr. Waxman X Mr. Bilirakis X Mr. Markey X Mr. Upton X Mr. Boucher Mr. Stearns X Mr. Towns X Mr. Gillmor X Mr. Pailone X Mr. Deal X Mr. Brown Mr. Whitfield X Mr. Gordon Mr. Norwood Mr. Rush X Ms. Cubin Ms. Eshoo Mr. Shimkus X Mr. Stupak X Ms. Wilson Mr. Engel Mr. Shadegg X Mr. Wynn X Mr. Pickering X Mr. Green X Mr. Fosseila X Mr. Strickland X Mr. Blunt Ms. DeGette X Mr. Buyer X Ms. Capps X Mr. Radanovich X Mr. Doyle X Mr. Bass X Mr. Allen X Mr. Pitts X Mr. Davis Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis X Mr. Terry X Mr. Gonzalez Mr. Ferguson X Mr. Inslee X Mr. Rogers X Ms. Baldwin Mr. Otter Mr. Ross X Ms. Myrick X Mr. Sullivan X Mr. Murphy X Mr. Burgess X Ms. Blackburn X 7/20/2005 17 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE # 45 BiH: H.R. 2355, Health Care Choice Act of 2005. AMENDMENT: An amendment by Mr. Stupak, No. 9, to prohibit an insurer from offering coverage in a secondary state unless the coverage meets the requirements specified in H.R. 2259 (as introduced in the 109" Congress) relating to access to specialists, obstetrical and gynecological care, and pediatric care. DISPOSITION: NOT AGREED TO, by a roll call vote of 16 yeas to 23 nays. REPRESENTATIVE YEAS NAYS | PRESENT REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingell X Mr. Hail X Mr. Waxman X Mr. Bilirakis X Mr. Markey X Mr. Upton X Mr. Boucher Mr. Stearns X Mr. Towns Mr. Gillmor Mr. Pallone X Mr. Deal X Mr. Brown X Mr. Whitfield X Mr. Gordon Mr. Norwood Mr. Rush Ms. Cubin Ms. Eshoo Mr. Shimkus X Mr. Stupak X Ms. Wilson Mr. Engel Mr. Shadegg X Mr. Wynn X Mr. Pickering X Mr. Green X Mr. Fossella X Mr. Strickland X Mr. Blunt Ms. DeGette X Mr. Buyer X Ms. Capps X Mr. Radanovich X Mr. Doyle X Mr. Bass X Mr. Alien X Mr. Pitts X Mr. Davis Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis Mr. Terry X Mr. Gonzalez Mr. Ferguson X Mr. Inslee X Mr. Rogers Ms. Baldwin Mr. Otter Mr. Ross X Ms. Myrick X Mr. Sullivan X Mr. Murphy X Mr. Burgess X Ms. Blackburn 7/20/2005 18 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE #46 Biłł: H.R. 2355, Health Care Choice Act of 2005. AMENDMENT: An amendment by Ms. Capps, No. 10, to prohibit an insurer from offering coverage in a secondary state unless the insurer carries out a policy of not refusing to provide coverage for women who have had breast cancer that has been in remission for 5 years. DISPOSITION: NOT AGREED TO, by a roll call vote of 15 yeas to 20 nays. REPRESENTATIVE YEAS NAYS | PRESENT REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingell X Mr. Haif X Mr. Waxman Mr. Bilirakis X Mr. Markey X Mr. Upton Mr. Boucher Mr. Stearns Mr. Towns X Mr. Gilimor X Mr. Palione X Mr. Deal X Mr. Brown Mr. Whitfield Mr. Gordon Mr. Norwood Mr. Rush X Ms. Cubin X Ms. Eshoo Mr. Shimkus X Mr. Stupak Ms. Wilson X Mr. Engel Mr. Shadegg X Mr. Wynn X Mr. Pickering X Mr. Green X Mr. Fossella Mr. Strickland Mr. Błunt Ms. DeGette Mr. Buyer Ms. Capps X Mr. Radanovich X Mr. Doyle Mr. Bass X Mr. Allen Mr. Pitts Mr. Davis X Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis Mr. Terry X Mr. Gonzalez X Mr. Ferguson X Mr. Inslee X Mr. Rogers X Ms. Baldwin X Mr. Otter Mr. Ross X Ms. Myrick X Mr. Sullivan Mr. Murphy X Mr. Burgess X Ms. Blackburn X 7/20/2005 19 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE # 47 Bill: H.R. 2355, Health Care Choice Act of 2005. AMENDMENT: An en bloc amendment by Mr. Green, No. 11, to (1) prohibit an insurer from offering coverage in a secondary state unless the coverage meets the requirements specified in section 113 (relating to access to emergency care) of H.R. 2259 (as introduced in the 109" Congress); and, (2) to prohibit an insurer from offering coverage in a secondary state unless the issuer offers comprehensive coverage for routine immunizations for children. DISPOSITION: NOT AGREED TO, by a roll call vote of 18 yeas to 23 nays. REPRESENTATIVE YEAS NAYS | PRESENT | REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingell X Mr. Hall X Mr. Waxman Mr. Bilirakis X Mr. Markey X Mr. Upton X Mr. Boucher Mr. Stearns Mr. Towns X Mr. Gillmor X Mr. Pallone X Mr. Deal X Mr. Brown Mr. Whitfield Mr. Gordon Mr. Norwood Mr. Rush X Ms. Cubin X Ms. Eshoo Mr. Shimkus X Mr. Stupak Ms. Wilson X Mr. Engel Mr. Shadegg X Mr. Wynn X Mr. Pickering X Mr. Green X Mr. Fossella X Mr. Strickland Mr. Blunt Ms. DeGette X Mr. Buyer Ms. Capps X Mr. Radanovich X Mr. Doyle Mr. Bass X Mr. Allen X Mr. Pitts Mr. Davis X Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis X Mr. Terry X Mr. Gonzalez X Mr. Ferguson X Mr. Inslee X Mr. Rogers X Ms. Baldwin X Mr. Otter Mr. Ross X Ms. Myrick X Mr. Sullivan X Mr. Murphy X Mr. Burgess X Ms. Blackburn X 7/20/2005 20 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE # 48 Biłł: H.R. 2355, Health Care Choice Act of 2005. AMENDMENT: An amendment by Ms. Capps, No. 12, to prohibit an insurer from offering health insurance coverage in a secondary state, if an applicable state authority of a secondary state forwards a complaint regarding a claim for benefit or market conduct to the applicable state authority of the primary state, and the authority of the primary state does not commence an investigation within 10 days or reach a decision within a reasonable time (or not more than 90 days). DISPOSITION: NOT AGREED TO, by a roll call vote of 19 yeas to 23 nays. REPRESENTATIVE YEAS NAYS | PRESENT REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingell X Mr. Half X Mr. Waxman Mr. Bilirakis X Mr. Markey X Mr. Upton X Mr. Boucher Mr. Stearns Mr. Towns X Mr. Gillmor X Mr. Pallone . . X Mr. Deal X Mr. Brown Mr. Whitfield Mr. Gordon Mr. Norwood Mr. Rush X Ms. Cubin Ms. Eshoo Mr. Shimkus X Mr. Stupak Ms. Wilson X Mr. Engel Mr. Shadegg X Mr. Wynn X Mr. Pickering X Mr. Green X Mr. Fossella X Mr. Strickland X Mr. Biunt X Ms. DeGette X Mr. Buyer Ms. Capps X Mr. Radanovich X Mr. Doyle Mr. Bass X Mr. Allen X Mr. Pitts Mr. Davis X Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis X Mr. Terry X Mr. Gonzalez X Mr. Ferguson X Mr. Inslee X Mr. Rogers X Ms. Baldwin X Mr. Otter Mr. Ross X Ms. Myrick X Mr. Sullivan X Mr. Murphy X Mr. Burgess X Ms. Blackburn X 7/20/2005 21 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE #49 Biłł: H.R. 2355, Health Care Choice Act of 2005. AMENDMENT: An amendment by Mr. Inslee, No. 13, to prohibit an insurer from offering coverage in a DISPOSITION: NOT AGREED TO, by a roll call vote of 19 yeas to 24 nays. secondary state unless it complies with all the laws of the secondary state regarding access to coverage and benefits for individuals with pediatric cancer. REPRESENTATIVE YEAS NAYS | PRESENT | REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingell X Mr. Hall X Mr. Waxman Mr. Bilirakis X Mr. Markey X Mr. Upton X Mr. Boucher Mr. Stearns Mr. Towns X Mr. Gillmor X Mr. Pallone X Mr. Deal X Mr. Brown Mr. Whitfield X Mr. Gordon Mr. Norwood Mr. Rush X Ms. Cubin Ms. Eshoo Mr. Shimkus X Mr. Stupak Ms. Wilson X Mr. Engel Mr. Shadegg X Mr. Wynn X Mr. Pickering X Mr. Green X Mr. Fossella X Mr. Strickland X Mr. Blunt X MS, DeGette X Mr. Buyer Ms. Capps X Mr. Radanovich X Mr. Doyle Mr. Bass X Mr. Allen X Mr. Pitts Mr. Davis X Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis X Mr. Terry X Mr. Gonzalez X Mr. Ferguson X Mr. Inslee X Mr. Rogers X Ms. Baldwin X Mr. Otter Mr. Ross X Ms. Myrick X Mr. Sullivan X Mr. Murphy X Mr. Burgess X Ms. Blackburn X 7/20/2005 22 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE #50 Bill: H.R. 2355, Health Care Choice Act of 2005, AMENDMENT: An amendment by Ms. Baldwin, No. 14, to permit a secondary state to ban an insurer from selling coverage in a secondary state for a period up to 5 years, if the applicable state authority of the secondary state finds repeated violations of consumer protection laws by a health insurer licensed in another state. DISPOSITION: NOT AGREED TO, by a roll call vote of 18 yeas to 24 nays, REPRESENTATIVE YEAS NAYS | PRESENT | REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingell X Mr. Hall X Mr. Waxman Mr. Bilirakis X Mr. Markey X Mr. Upton X Mr. Boucher Mr. Stearns Mr. Towns X Mr. Gillmor X Mr. Pablone X Mr. Deal X Mr. Brown Mr. Whitfield Mr. Gordon Mr. Norwood Mr. Rush X Ms. Cubin Ms. Eshoo Mr. Shimkus X Mr. Stupak Ms. Wilson X Mr. Engel Mr. Shadegg X Mr. Wynn Mr. Pickering X Mr. Green X Mr. Fossella X Mr. Strickland X Mr. Blunt X Ms. DeGette X Mr. Buyer Ms. Capps X Mr. Radanovich X Mr. Doyle Mr. Bass X Mr. Allen X Mr. Pitts Mr. Davis X Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis X Mr. Terry X Mr. Gonzalez X Mr. Ferguson X Mr. Inslee X Mr. Rogers X Ms. Baldwin X Mr. Otter Mr. Ross X Ms. Myrick X Mr. Sullivan X Mr. Murphy X Mr. Burgess X Ms. Blackburn X 7/20/2005 23 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE #51 BiH: H.R. 2355, Health Care Choice Act of 2005. AMENDMENT: An amendment by Mr. Strickland, No. 15, to prohibit an insurer from offering coverage in a secondary state unless it complies with all the laws of the secondary state regarding access to coverage and benefits for pregnant women and children. DISPOSITION: NOT AGREED TO, by a roll call vote of 20 yeas to 24 nays. REPRESENTATIVE YEAS NAYS | PRESENT | REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingeil X Mr. Hali X Mr. Waxman X Mr. Bilirakis X Mr. Markey X Mr. Upton X Mr. Boucher Mr. Stearns Mr. Towns X Mr. Gilimor X Mr. Pallone X Mr. Deal X Mr. Brown Mr. Whitfield X Mr. Gordon Mr. Norwood Mr. Rush X Ms. Cubin Ms. Eshoo Mr. Shimkus X Mr. Stupak Ms. Wilson X Mr. Engel X Mr. Shadegg X Mr. Wynn X Mr. Pickering X Mr. Green Mr. Fossella X Mr. Strickland X Mr. Blunt X Ms. DeGette X Mr. Buyer Ms. Capps X Mr. Radanovich X Mr. Doyle Mr. Bass X Mr. Allen X Mr. Pitts Mr. Davis X Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis X Mr. Terry X Mr. Gonzalez X Mr. Ferguson X Mr. Inslee X Mr. Rogers X Ms. Baldwin X Mr. Otter Mr. Ross X Ms. Myrick X Mr. Sullivan X Mr. Murphy X Mr. Burgess X Ms. Blackburn X 7/20/2005 24 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE #52 Biłł: H.R. 2355, Health Care Choice Act of 2005. AMENDMENT: An amendment by Mr. Allen, No. 16, to define the term “covered laws' to not include any laws, rules, regulations, agreements, and orders governing coverage of, and access to, prescription drugs. DISPOSITION: NOT AGREED TO, by a roll call vote of 22 yeas to 26 nays. REPRESENTATIVE YEAS NAYS | PRESENT | REPRESENTATIVE YEAS NAYS PRESENT Mr. Barton X Mr. Dingell X Mr. Hall X Mr. Waxman X Mr. Bilirakis X Mr. Markey X Mr. Upton X Mr. Boucher Mr. Stearns X Mr. Towns X Mr. Gillmor X Mr. Pallone X Mr. Deal X Mr. Brown X Mr. Whitfield X Mr. Gordon Mr. Norwood Mr. Rush X Ms. Cubin Ms. Eshoo Mr. Shimkus X Mr. Stupak Ms. Wilson X Mr. Engel X Mr. Shadegg X Mr. Wynn X Mr. Pickering X Mr. Green X Mr. Fossella X Mr. Strickland X Mr. Blunt X Ms. DeGette X Mr. Buyer X Ms. Capps X Mr. Radanovich X Mr. Doyle Mr. Bass X Mr. Alien X Mr. Pitts Mr. Davis X Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis X Mr. Terry X Mr. Gonzalez X Mr. Ferguson X Mr. Inslee X Mr. Rogers X Ms. Baldwin X Mr. Otter Mr. Ross X Ms. Myrick X Mr. Sullivan X Mr. Murphy X Mr. Burgess X Ms. Blackburn X 7/20/2005 25 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE #53 Bill: H.R. 2355, Health Care Choice Act of 2005, AMENDMENT: An amendment by Mr. Strickland, No. 17, to prohibit an insurer from offering coverage in a DISPOSITION: NOT AGREED TO, by a roll call vote of 21 yeas to 25 nays. secondary state unless it complies with all the laws of the secondary state regarding access to coverage and benefits for individuals with mental illness. REPRESENTATIVE YEAS NAYS | PRESENT REPRESENTATIVE YEAS NAYS PRESENT MT. Barton X Mr. Dingell X Mr. Hall X Mr. Waxman X Mr. Bilirakis X Mr. Markey Mr. Upton X Mr. Boucher Mr. Stearns X Mr. Towns X Mr. Gillmor X Mr. Pailone X Mr. Deal X Mr. Brown X Mr. Whitfield Mr. Gordon Mr. Norwood Mr. Rush X Ms. Cubin Ms, Eshoo Mr. Shimkus X Mr. Stupak Ms. Wilson X Mr. Engel X Mr. Shadegg X Mr. Wynn X Mr. Pickering X Mr. Green X Mr. Fossella X Mr. Strickland X Mr. Blunt X Ms. DeGette X Mr. Buyer X Ms. Capps X Mr. Radanovich X Mr. Doyle Mr. Bass X Mr. Allen X Mr. Pitts Mr. Davis X Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Sołis X Mr. Terry X Mr. Gonzalez X Mr. Ferguson X Mr. Inslee X Mr. Rogers X Ms. Baldwin X Mr. Otter Mr. Ross X Ms. Myrick X Mr. Sullivan X Mr. Murphy X Mr. Burgess X Ms. Blackburn X 7/20/2005 26 COMMITTEE ON ENERGY AND COMMERCE -- 109TH CONGRESS ROLL CALL VOTE # 54 Biłł: H.R. 2355, Health Care Choice Act of 2005. MOTION: A motion by Mr. Barton to order H.R. 2355 reported to the House, amended. DISPOSITION: AGREED TO, by a roll call vote of 24 yeas to 23 nays. REPRESENTATIVE YEAS NAYS | PRESENT | REPRESENTATIVE YEAS NAYS PRESENT Mr, Barton X Mr. Dingell X Mr. Hall X Mr. Waxman X Mr. Bilirakis X Mr. Markey X Mr. Upton X Mr, Boucher Mr. Stearns X Mr. Towns X Mr. Gillmor X Mr. Pallone X Mr. Deal X Mr. Brown X Mr. Whitfield Mr. Gordon Mr. Norwood Mr. Rush X Ms. Cubin Ms. Eshoo Mr. Shimkus X Mr. Stupak Ms. Wilson X Mr. Engel X Mr. Shadegg X Mr. Wynn X Mr. Pickering X Mr. Green X Mr. Fossella X Mr. Strickland X Mr. Blunt X Ms. DeGette X Mr. Buyer X Ms. Capps X Mr. Radanovich X Mr. Doyle Mr. Bass X Mr. Allen X Mr. Pitts Mr. Davis X Ms. Bono X Ms. Schakowsky X Mr. Walden X Ms. Solis X Mr. Terry X Mr. Gonzalez X Mr. Ferguson X Mr. Instee X Mr. Rogers X Ms. Baldwin X Mr. Otter Mr, Ross X Ms. Myrick X Mr. Sullivan X Mr. Murphy X Mr. Burgess X Ms. Blackburn X 7/20/2005 27 COMMITTEE OVERSIGHT FINDINGS Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House of Representatives, the Committee held a legislative hearing and made findings that are reflected in this report. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES The goal of H.R. 2355 is to lower health insurance premium costs and allow more people in the individual market to afford health in- SUII’all Ce. NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES In compliance with clause 3(c)(2) of rule XIII of the Rules of the House of Representatives, the Committee finds that H.R. 2355, The Health Care Choice Act of 2005, would result in no new or in- creased budget authority, entitlement authority, or tax expendi- tures Or revenues. COMMITTEE COST ESTIMATE The Committee adopts as its own the cost estimate prepared by the Director of the Congressional Budget Office pursuant to section 402 of the Congressional Budget Act of 1974. CONGRESSIONAL BUDGET OFFICE ESTIMATE Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House of Representatives, the following is the cost estimate provided by the Congressional Budget Office pursuant to section 402 of the Congressional Budget Act of 1974: U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, September 12, 2005. Hon. JOE BARTON, Chairman, Committee on Energy and Commerce, House of Representatives, Washington, DC. DEAR MR. CHAIRMAN: The Congressional Budget Office has pre- pared the enclosed cost estimate for H.R. 2355, the Health Care Choice Act of 2005. If you wish further details on this estimate, we will be pleased to provide them. The CBO staff contact is Tom Bradley. Sincerely, - DOUGLAS HOLTZ-EAKIN, Director. Enclosure. H.R. 2355—Health Care Choice Act of 2005 Summary: H.R. 2355 would amend the Public Health Service Act to permit an entity licensed by one state (the “primary” state) to offer health insurance coverage to individuals residing in that state, to also offer that health insurance coverage to individuals re- siding in a “secondary” state. Enacting H.R. 2355 would affect the federal budget in two ways: it would increase federal revenues from payroll and income taxes, and it would increase direct spending for 28 Medicaid. Those changes would begin in 2007, because the bill’s provisions would take effect one year after enactment. The increase in revenues would result largely from a reduction in the number of people who receive health insurance through em- ployer-sponsored plans. That would reduce the share of compensa- tion that is tax-advantaged (health insurance premiums) and in- crease the share that is taxable (wages and salaries). CBO esti- mates that enacting H.R. 2355 would increase federal revenues by $1.9 billion over the 2007–2010 period and $12.6 billion over the 2007–2015 period. Social Security payroll taxes, which are off-budg- et, account for about 30 percent of that amount. The increase in direct spending would result from the enrollment in Medicaid of people who, under current law, would either be cov- ered through an employer-sponsored plan or purchase an indi- vidual insurance policy. CBO estimates that enacting H.R. 2355 would increase federal direct spending for Medicaid by $160 million ºi the 2007–2010 period and $1.0 billion over the 2007–2015 pe- TIOOl. - Pursuant to section 407 of H. Con. Res. 95 (the Concurrent Reso- lution on the Budget, Fiscal Year 2006), CBO estimates that enact- ing H.R. 2355 would cause an increase in direct spending of greater than $5 billion in at least one of the 10-year periods between 2016 and 2055. H.R. 2355 would preempt a broad range of state insurance laws that otherwise would apply to health insurance issuers that are li- censed in one state and sell policies in another. The preemptions would limit the application of state laws, and thus would be inter- governmental mandates as defined in the Unfunded Mandates Re- form Act (UMRA). These preemptions of state regulatory authority would not result in additional spending by states. States may, how- ever, lose some revenues as a result of lower collections for licens- ing fees, but those losses would be minimal. Consequently, CBO es- timates that the cost of the mandates would be far below the threshold established in UMRA ($62 million in 2005, adjusted an- nually for inflation). The bill would have other effects on state budgets—increasing spending for Medicaid, but also increasing revenues from some tax sources. CBO estimates that increased enrollment in Medicaid would result in additional spending by states of $760 million over the 2007–2015 period. H.R. 2355 contains no private-sector mandates as defined in UMRA. Estimated cost to the Federal Government: The estimated budg- etary impact of H.R. 2355 is shown in the following table. The costs of this legislation fall within budget function 550 (health). By fiscal year, in millions of dollars— 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 CHANGES IN REVENUES Income and Hl Payroll Taxes (On- budget) ..…. 0 70 170 370 640 980 1,340 1,520 1,620 1,710 SOCial Security Payroll Taxes (off- budget) ..…. 0 40 90 200 330 490 660 740 780 820 Total Changes in Revenues 0 110 260 570 970 1,470 2,000 2,260 2,400 2,530 29 By fiscal year, in millions of dollars— 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 CHANGES IN DIRECT SPENDING Estimated Budget Authority .......... 0 10 20 50 80 120 160 170 190 200 Estimated Outlays ......................... 0 10 20 50 80 120 160 170 190 200 Note—Hi = Hospital Insurance (Part A of Medicare). Basis of estimate: The provisions of H.R. 2355 would take effect one year after enactment. For this estimate, CBO assumes that H.R. 2355 will be enacted in the fall of 2005. Therefore, the bill would affect spending and revenues beginning in fiscal year 2007. For simplicity, the following discussion of distributional effects (such as changes in premiums and in the number of people with health insurance coverage) assumes that the ultimate effects would be realized in the first year. The estimated budgetary effects, how- ever, reflect CBO’s expectation that it would take 5 to 10 years be- fore the ultimate effects on health insurance markets of enacting the bill would be realized. H.R. 2355 would amend the Public Health Service Act to permit an entity licensed by one state to offer health insurance coverage to individuals residing in that state, to also offer that health insur- ance coverage to individuals residing in a secondary state. The bill would permit such individual health insurance coverage 1 to be of fered in a secondary state only if the primary state uses a risk- based capital formula for the determination of capital and surplus requirements for all health insurance issuers. The individual health insurance policies offered in a secondary state would be exempt from the laws and regulations of that state with respect to consumer protections, mandated coverage of serv- ices or benefits, and other rules affecting the offer, sale, rating (in- cluding medical underwriting), renewal, and issuance of individual health insurance coverage. Those policies would be required to com- ply with the laws and regulations of the primary state, and the in- surance issuer would be required to provide for a process for cov- ered individuals to appeal coverage decisions to an independent medical reviewer. Under current law, issuers of individual health insurance must be licensed in the state in which they offer such coverage, and the coverage must comply with the laws and regulations of that state. There is considerable variation across states in two areas that have a substantial effect on the price of individual health insurance: • Mandates that require coverage of certain services or bene- fits, and • Rules affecting the extent to which insurers may charge different prices for coverage offered to individuals expected to incur costs above or below the average. In general, health insurance that includes coverage of mandated benefits will cost more than it would if those benefits were not re- quired. In aggregate, this estimate assumes that if only those ben- efit mandates imposed by the states with the lowest-cost mandates were in effect in all states, the price of individual health insurance would be reduced by about 5 percent, on average. * Individual health insurance coverage is offered to individuals, rather than through a group (such as an employer.) Such individual coverage may provide health insurance benefits to a sin- gle individual, or to several people (such as the members of a family). 30 Limiting the extent of variation in the prices charged to individ- uals expected to incur costs above or below the average tends to in- crease the price charged to individuals expected to have lower- than-average costs, while lowering the price for people expected to have higher-than-average costs. Such price compression also tends to increase the average price compared to an alternative in which variation in the prices charged more closely reflects the costs that individuals are expected to incur. That is because price compres- sion makes coverage more affordable to people who expect to incur relatively high costs (so more of them purchase the coverage), whereas price compression increases the cost of coverage for people who would be expected to incur relatively low costs (so fewer of them purchase the coverage than if those individuals were charged prices that more closely reflect their expected cost). Under H.R. 2355, CBO expects that individual health insurance would be offered across state lines to individuals in states with rel- atively expensive coverage mandates and rate-setting rules that permit relatively little variation in the prices an insurer may charge. The insurers offering those policies would be licensed in, and regulated by, states that do not have those characteristics. For most people in a secondary state, the price of individual health insurance coverage offered by an insurer licensed in a pri- mary state would be lower than the price under current law of in- dividual coverage offered by an insurer licensed by their state. Con- versely, individual health insurance coverage from out-of-state in- surers either would not be offered to people expected to have rel- atively high health care costs, or it would be offered at a price that is higher than the price under current law of individual coverage offered by an insurer licensed by their state. The shift of individ- uals expected to have relatively low health care costs to out-of-state insurance coverage would increase the price of coverage offered by insurers licensed in-state, and could lend to erosion of the avail- ability of such coverage by insurers located in secondary states. Federal revenues CBO estimates that enacting H.R. 2355 would increase federal tax revenues by $1.9 billion over the 2007–2010 period and $12.6 billion over the 2007–2015 period. (The bill would have no effect on revenues in 2006.) Social Security payroll taxes, which are off- budget, account for about 30 percent of those amounts. Those amounts are the net effect of increases in revenue resulting from a reduction in the number of people covered by employer-sponsored health insurance, increases in revenue from self-employed individ- uals who will purchase individual coverage under current law, and decreases in revenue from a rise in the number of self-employed in- dividuals who purchase individual health insurance. The reduction in the number of people covered by employer-sponsored health in- surance accounts for over 90 percent of the estimated change in federal tax revenues. Some employers (especially smaller ones) would find it desirable to stop offering coverage to their employees because the insurance available in the individual market had become cheaper. In addi- tion, some people with relatively low health care costs who, under current law, will obtain health insurance coverage through an em- ployer, would choose instead to purchase individual health insur- 31 ance coverage from an out-of-state insurer. That would increase the per-person cost of the employer's group health insurance, and would result in additional employers deciding to drop the group coverage. Based on CBO’s analysis of research on the responses of individuals and firms to changes in the price of health insurance, CBO estimates that, if the full effect of H.R. 2355 were realized im- mediately, about 1 million people—including both employees and covered dependents—would lose employer-sponsored health insur- ance coverage. Under current law, the employer's share of premiums for em- ployer-sponsored health insurance and most of the employee's share of those premiums are exempt from taxation. By reducing the number of people covered by employer-sponsored health insur- ance, H.R. 2355 would reduce the share of employees’ compensation that is tax-advantaged (health insurance premiums) and would in- crease the share that is taxable (wages and salaries). CBO esti- mates that H.R. 2355 ultimately would reduce annual spending on employer-sponsored health insurance by $5 billion in 2006 dollars. (That change is less than 1 percent of total tax-advantaged spend- ing on employer-sponsored health insurance in the United States.) Some of the resulting increase in taxable income from wages and salaries would be offset by higher itemized deductions for tax- payers who lose employer-sponsored health insurance, itemize their deductions, and spend more than 7.5 percent of their adjusted gross income on health care and health insurance. The tax treatment of spending on individual health insurance coverage generally is less generous than for employer-sponsored coverage. However, spending on individual coverage by self-em- ployed individuals is deductible. For the self-employed who will buy individual health insurance under current law, CBO estimates that H.R. 2355 ultimately would reduce spending on premiums by $600 million in 2006 dollars. Almost all of that reduction would result from a net reduction in premiums for self-employed people who continue to purchase individual insurance. (Some of those self-em- ployed people who retain individual coverage would pay higher pre- miums.) Self-employed individuals who would drop coverage in re- sponse to higher premiums account for less than $50 million of that estimated change in spending on premiums. H.R. 2355 would reduce the price of individual insurance for some self-employed people who are expected to incur relatively low health care costs, live in secondary states, and will be uninsured under current law. Ultimately, CBO estimates that some of those self-employed people would spend about $300 million (in 2006 dol- lars) to buy individual coverage under H.R. 2355. Direct spending H.R. 2355 would affect the number of people who enroll in Med- icaid. Some people who would lose employer-sponsored health in- surance would enroll in Medicaid, whereas others who, under cur- rent law, would be covered by Medicaid would instead enroll in health insurance. On net, CBO estimates that enacting H.R. 2355 would increase federal spending for Medicaid by $160 million over the 2007–2010 period and $1.0 billion over the 2007–2015 period. Medicaid Spending for People Who Lose Private Coverage. About 25 percent of employees are in families with incomes under 200 32 percent of the Federal Poverty Line (FPL). Some of those people would potentially be eligible for Medicaid. CBO estimates that about 40 percent of people losing employer-sponsored coverage would have incomes under 200 percent of the FPL, about 25 per- cent of them would be eligible for Medicaid, and about 50 percent of them would enroll. CBO assumes that those people would be somewhat more costly than that average Medicaid-eligible indi- vidual, and that federal spending for Medicaid would increase by about $1.1 billion over the 2007–2015 period. Medicaid Savings for People Who Gain Private Coverage. Of the people gaining employer-sponsored insurance under H.R. 2355, CBO estimates that approximately 10 percent would have incomes under 200 percent of the FPL. Of these, about one-half are children and one-half are adults. About one-third of those children would otherwise be enrolled in Medicaid, and about 8 percent of adults would otherwise be enrolled in Medicaid, CBO estimates. Assuming that those children and adults would be less costly than average, implementing H.R. 2355 would decrease federal Medicaid spending by about $100 million over the 2007–2015 period as a result of this shift to private health insurance coverage. Effect of H.R. 2355 on the number of people with and without health insurance CBO estimates that enacting H.R. 2355 would not have a sub- stantial effect on the number of people who have health insurance coverage: compared to current law, there could be a small increase or decrease in the number of uninsured individuals. We estimate that about 1 million people would lose or drop employer-sponsored coverage. Many of those people would obtain individual health in- surance coverage, as would many people who are uninsured under current law—resulting in a small net impact on the number of peo- ple with health insurance. H.R. 2355 would reduce the price of individual health insurance coverage for people expected to have relatively low health care costs, while increasing the price of coverage for those expected to have relatively high health care costs. Therefore, CBO expects that there would be an increase in the number of relatively healthy in- dividuals, and a decrease in the number of individuals expected to have relatively high cost, who buy individual coverage. Relatively healthy individuals are likely to be more price-sensitive than unhealthy individuals (and there are more relatively healthy peo- ple). As a result, CBO assumes that there would be a net increase in the total number of people with individual coverage. We expect that the magnitude of that increase would be roughly similar to the number of people who lost employer-sponsored coverage. Estimated long-term effects on direct spending: Pursuant to sec- tion 407 of H. Con. Res. 95 (the Concurrent Resolution on the Budget, Fiscal Year 2006), CBO estimates that enacting H.R. 2355 would cause an increase in direct spending of greater than $5 bil- lion in at least one of the 10-year periods between 2016 and 2055. Those costs would come from increased spending on Medicaid. We estimate that the increase in Medicaid spending would reach $200 million in 2015, and would continue to grow. Estimated impact on state, local, and tribal governments: H.R. 2355 would preempt a broad range of insurance laws that other- 33 wise would apply to health insurance issuers that are licensed in one state (the primary state) and provide insurance coverage in an- other state (a secondary state). The preemption would limit the ap- plication of state laws, and thus would be intergovernmental man- dates as defined in UMRA. Health insurance issuers would be ex- empt from laws in secondary states that establish coverage require- ments or regulate insurance with the exception of requirements to register with the secondary state, submit to financial reviews under limited circumstances, participate in solvency associations, or com- ply with state laws governing fraud, abuse, or unfair claims settle- ments. The bill specifically would allow secondary states to collect premium taxes on policies sold within the state. The preemption of state regulatory authority would impose no duty on states that would result in additional spending. States may, however, lose some revenues as a result of lower collections for licensing fees, but those loses would be minimal. The bill would have other effects on state budgets—increasing spending for Medicaid, but also increasing revenues from state in- come taxes. CBO estimates that increased enrollment in Medicaid would result in additional spending by states of $760 million over the 2007–2015 period. CBO estimates that the bill would have a positive impact on in- come tax collections by state governments, but the magnitude of that change is unclear. A decrease in the proportion of employer- sponsored insurance, which many states exempt from income for tax purposes, as part of total compensation packages would result in more compensation that is subject to state income tax collec- tions. Because of uncertainty about the expected changes in cov- erage among individual states and different tax rates in each state, CBO cannot estimate the magnitude of the increase. State collec- tions of premium taxes would also change, but because of uncer- tainty about shifts between types of insurance that are taxable and those that are exempt from taxes and because of different tax rates among the states, CBO cannot estimate either the direction or the magnitude of any net change in those collections. Estimated impact on the private sector: H.R. 2355 contains no private-sector mandates as defined in UMRA. Estimate prepared by: Federal Costs: Tom Bradley, Shinobu Su- zuki, and Jeanne De Sa. Impact on State, Local, and Tribal Gov- ernments: Leo Lex. Impact on the Private Sector: Stuart Hagen and David Auerbach. Estimate approved by: Peter H. Fontaine, Deputy Assistant Di- rector for Budget Analysis. FEDERAL MANDATES STATEMENT The Committee adopts as its own the estimate of Federal man- dates prepared by the Director of the Congressional Budget Office pursuant to section 423 of the Unfunded Mandates Reform Act. ADVISORY COMMITTEE STATEMENT No advisory committees within the meaning of section 5(b) of the Federal Advisory Committee Act were created by this legislation. 34 CONSTITUTIONAL AUTHORITY STATEMENT Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House of Representatives, the Committee finds that the Constitutional au- thority for this legislation is provided in Article I, section 8, clause 3, which grants Congress the power to regulate commerce with for- eign nations, among the several States, and with the Indian tribes. APPLICABILITY TO LEGISLATIVE BRANCH The Committee finds that the legislation does not relate to the terms and conditions of employment or access to public services or accommodations within the meaning of section 102(b)(3) of the Con- gressional Accountability Act. SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION Section 1. Short title Section 1 designates the title of the bill as the “Health Care Choice Act of 2005.” Section 2. Specification of constitutional authority for enactment of law Section 2 specifies that this Act is enacted pursuant to the power granted Congress under article I, section 8, clause 3, of the United States Constitution. Section 3. Findings Section 3 establishes the findings for the legislation. Section 4. Cooperative governing of individual health insurance cov- erage Section 4(a) amends Title XXVII of the Public Health Service Act by adding at the end a new Part D entitled “Cooperative Governing of Individual Health Insurance Coverage” as set out below. Section 2795. Definitions The bill would add a new section 2795 to define the terms relat- ing to the Cooperative Governing of Individual Health Insurance Coverage. Section 2796. Application of law New section 2796(a) states that the applicable laws of a primary state shall apply to individual health insurance coverage offered by a health insurer in the primary state, and in any secondary state. This provision would only apply if the coverage and the issuer com- ply with the conditions of this section with respect to the offering of coverage in any secondary state. While H.R. 2355 would exempt a health insurer from the covered laws of the secondary state with respect to the regulation of its in- surance products, new section 2796(b) would allow secondary states to require that primary state insurers do several things: This would include requiring the insurer to (1) pay applicable premium and other taxes (including high risk pool assessments) that are lev- ied on insurers under the laws of the state; (2) register with and designate the state insurance commissioner as its agent for the 35 purposes of receiving service of legal documents or process; (3) sub- mit to an examination of its financial condition by the state insur- ance commissioner if the insurance commissioner of the primary state has not done an examination within a period of time rec- ommended by the National Association of Insurance Commis- sioners (NAIC) and in accordance with its examiners’ handbook; (4) comply with a lawful order issued in a voluntary dissolution pro- ceeding, or in a delinquency proceeding commenced by the state in- surance commissioner where there has been a finding of financial impairment; (5) comply with an injunction issued by a court of com- petent jurisdiction, upon petition by the state insurance commis- sioner alleging that the issuer is in hazardous financial condition; (6) participate, on a nondiscriminatory basis, in any insurance in- solvency guaranty association or similar association to which a health insurer in the state is required to belong; (7) comply with any state law regarding fraud and abuse (as defined in the bill), except that if the state seeks an injunction regarding fraudulent conduct, such an injunction must be obtained from a court of com- petent jurisdiction; and, (8) comply with any state law regarding unfair claims settlement practices. New section 2796(c) requires that a health insurer offering cov- erage from a primary state into any secondary state must provide a notice to beneficiaries that the coverage they are offering is gov- erned by the laws and regulations of another state. The notice must also contain information that the policy may be less expen- sive than others offered because it is not subject to all of the insur- ance laws and regulations of the secondary state, including cov- erage of some services or benefits mandated by the laws of the sec- ondary state. New section 2796(d) prohibits the practice of re-underwriting an individual based on a health status-related factor. However, this section does not prohibit a health insurer from terminating or dis- continuing coverage or a class of coverage in accordance with sub- sections (b) and (c) of section 2742 of the Public Health Service Act. Further, it does not prohibit an insurer from (1) raising premium rates for all policy holders within a class based on claims experi- ence; (2) changing premiums or offering discounted premiums to in- dividuals who engage in wellness activities at intervals prescribed by the issuer; (3) reinstating lapsed coverage; or, (4) retroactively adjusting the rates charged an insured individual if the initial rates were set based on material misrepresentation by the indi- vidual at the time of issue. New section 2796(e) prohibits a health insurance issuer from of. fering individual health insurance coverage in a secondary state unless that coverage is currently offered for sale in the primary State. New section 2796(f) provides that any state may require a person acting, or offering to act, as an agent or broker for a health insurer with respect to the offering of individual health insurance coverage obtain a license from that state, with commissions or other com- pensation subject to the provisions of the laws of that state, except that a state may not impose any qualification or requirement which discriminates against a nonresident agent or broker. New section 2796(g) requires health insurance issuers that issue coverage in both primary and secondary states to submit to the in- 36 Surance commissioner of each state (1) a copy of the plan of oper- ation or feasibility study or any similar statement of the policy being offered and its coverage (which shall include the name of its primary State and its principal place of business); (2) written notice of any change in its designation of its primary state; and, (3) writ- ten notice from the issuer of the issuer's compliance with all the laws of the primary state. The issuer must also submit to any sec- ondary state insurance commissioner a copy of the issuer's quar- terly financial statement submitted to the primary state. This statement shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment ex- pense reserves made by a member of the American Academy of Ac- tuaries, or a qualified loss reserve specialist. New section 2796(h) states that nothing in this section shall be construed to affect the authority of Federal or state court from en- joining the solicitation or sale of individual health insurance cov- erage by a health insurance issuer to any person or group who is not eligible for such insurance, or the solicitation or sale of indi- vidual health insurance coverage that violates the requirements of section 2796(b)(1). New section 2796(i) clarifies that states have the ability to enjoin conduct that violate that state's laws to which the health insurer is subject. New section 2796(j) further clarifies that nothing in this legisla- tion shall affect the authority of any state to make use of its pow- ers to enforce the laws of the state to which the insurer is subject. However, any injunction regarding the conduct described in section 2796 (h) must be obtained from a Federal or state court of com- petent jurisdiction. - New section 2796(k) clarifies the states’ authority to sue, and states that nothing shall affect the authority of any state to bring action in any Federal or State court. New section 2796(1) clarifies that nothing in this section affects the applicability of state laws generally applicable to persons or corporations. New section 2796(m) clarifies the guaranteed availability of cov- erage to Health Insurance Portability and Accountability Act of 1996 HIPAA eligible individuals. If a health insurer is offering cov- erage in a primary state that does not accommodate residents of Secondary states or does not provide a working mechanism for resi- dents of a secondary state, and the secondary state has not adopted a qualified high risk pool, the issuer shall comply with the guaran- teed availability requirements for eligible individuals in section 2741 of the Public Health Service Act. Section 2797. Primary state must meet Federal floor before issuer may sell into secondary states New section 2797 clarifies that a health insurer may not offer, sell, or issue individual insurance coverage in a secondary state i the state insurance commissioner does not use a risk-based capital formula for the determination of capital and surplus requirements for all health insurers. 37 Section 2798. Independent external appeals process. New section 2798 prohibits a health insurance issuer from offer- ing, selling, or issuing individual health insurance coverage in a secondary state unless both the secondary and primary state do not have legislation or regulations in place establishing an independent review process for individuals covered by individual health insur- ance, or in the lack of legislation or regulations, the issuer provides an independent review mechanism substantially identical to that prescribed in the “Health Carrier External Review Model Act” of the National Association of Insurance Commissioners. Under this mechanism, the review must be conducted by an independent med- ical reviewer, or panel of such reviewers, which meet several quali- fication requirements. In referring a denial of a claim for an inde- pendent medical review, the panel must include a physician (allopathic or osteopathic) or other health care professional, defined as someone that provides health care services to individual patients on average at least two days per week. They must also be appro- priately credentialed or licensed in one or more states to deliver health care services; and typically treat the condition, make the di- agnosis, or provide the type of treatment under review. In the case of an external review relating to a child, a reviewer must have ex- pertise in pediatrics. Compensation provided by the issuer to an independent medical reviewer in connection with a review under this section must be reasonable and not contingent on the decision. The reviewer must also not be directly involved in the case nor re- lated to the parties involved. Section 2799. Enforcement New section 2799 establishes the enforcement mechanism of the legislation. With respect to specific individual health insurance cov- erage, the primary state for such coverage has sole jurisdiction to enforce the primary state's covered laws in the primary state and any secondary state. However, any secondary state has the author- ity to enforce its laws as set forth in the exceptions specified in the bill. In reviewing action initiated by the applicable secondary state authority, the court of competent jurisdiction shall apply the cov- ered laws of the primary state. In the case of individual health in- surance coverage offered in a secondary state that fails to comply with the covered laws of the primary state, the applicable state au- thority of the secondary state may notify the applicable state au- thority of the primary state. Section 4(b) establishes the effective date of this Act to be one year after the date of enactment. Section 4(c) requires the Comptroller General of the United States to study and report to the Congress annually at the end of each of the five years following the effective date of this Act. This report shall include the number of uninsured and under-insured in- dividuals, the availability and cost of health insurance policies for individuals with pre-existing medical conditions, the availability and cost of health insurance policies, the elimination or reduction of different types of benefits under health insurance policies offered in different states, and cases of fraud or abuse relating to health insurance coverage offered under such amendment and the resolu- tion of such cases. 38 Section 5. Severability Section 5 provides that if any provision of the Act or the applica- tion of such provision to any person or circumstance is held to be unconstitutional, the remainder of this Act and the application of the provisions of such to any other person or circumstance shall not be affected. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED In compliance with clause 3(e) of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill, as reported, are shown as follows (new matter is printed in italic and ºurs law in which no change is proposed is shown in TOIſla Il). PUBLIC HEALTH SERVICE ACT TITLE XXVII—REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE ::: :: :: :: ::: :}; >}: PART D–COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE COVERAGE SEC, 2795. DEFINITIONS. In this part: (1) PRIMARY STATE.—The term “primary State” means, with respect to individual health insurance coverage offered by a health insurance issuer, the State designated by the issuer as the State whose covered laws shall govern the health insurance issuer in the sale of such coverage under this part. An issuer, with respect to a particular policy, may only designate one such State as its primary State with respect to all such coverage it offers. Such an issuer may not change the designated primary State with respect to individual health insurance coverage once the policy is issued, except that such a change may be made upon renewal of the policy. With respect to such designated State, the issuer is deemed to be doing business in that State. (2) SECONDARY STATE.—The term “secondary State” means, with respect to individual health insurance coverage offered by a health insurance issuer, any State that is not the primary State. In the case of a health insurance issuer that is selling a policy in, or to a resident of, a secondary State, the issuer is deemed to be doing business in that secondary State. (3) HEALTH INSURANCE ISSUER.—The term “health insurance issuer” has the meaning given such term in section 2791(b)(2), except that such an issuer must be licensed in the primary State and be qualified to sell individual health insurance coverage in that State. (4) INDIVIDUAL HEALTH INSURANCE COVERAGE.-The term “in- dividual health insurance coverage” means health insurance coverage offered in the individual market, as defined in Section 2791(e)(1). 39 (5) APPLICABLE STATE AUTHORITY. —The term “applicable State authority” means, with respect to a health insurance issuer in a State, the State insurance commissioner or official or officials designated by the State to enforce the requirements of this title for the State with respect to the issuer. (6) HAZARDOUS FINANCIAL CONDITION.—The term “hazardous financial condition” means that, based on its present or reason- ably anticipated financial condition, a health insurance issuer is unlikely to be able— (A) to meet obligations to policyholders with respect to known claims and reasonably anticipated claims; or (B) to pay other obligations in the normal course of busi- 71.6SS. (7) COVERED LAWS.— (A) IN GENERAL.—The term “covered laws” means the laws, rules, regulations, agreements, and orders governing the insurance business pertaining to— (i) individual health insurance coverage issued by a health insurance issuer; (ii) the offer, sale, rating (including medical under- writing), renewal, and issuance of individual health insurance coverage to an individual; (iii) the provision to an individual in relation to in- dividual health insurance coverage of health care and insurance related services; (iv) the provision to an individual in relation to indi- vidual health insurance coverage of management, oper- ations, and investment activities of a health insurance issuer; and (v) the provision to an individual in relation to indi- vidual health insurance coverage of loss control and claims administration for a health insurance issuer with respect to liability for which the issuer provides insurance. (B) EXCEPTION.—Such term does not include any law, rule, regulation, agreement, or order governing the use of care or cost management techniques, including any require- ment related to provider contracting, network access or ade- quacy, health care data collection, or quality assurance. (8) STATE.—The term “State” means only the 50 States and the District of Columbia. (9) UNFAIR CLAIMS SETTLEMENT PRACTICES.—The term “un- fair claims settlement practices” means only the following prac- tices: (A) Knowingly misrepresenting to claimants and insured individuals relevant facts or policy provisions relating to coverage at issue. (B) Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under policies. (C) Failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims aris- ing under policies. 40 (D) Failing to effectuate prompt, fair, and equitable set- tlement of claims submitted in which liability has become reasonably clear. (E) Refusing to pay claims without conducting a reason- able investigation. (F) Failing to affirm or deny coverage of claims within a reasonable period of time after having completed an in- vestigation related to those claims. (G) A pattern or practice of compelling insured individ- uals or their beneficiaries to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them. (H) A pattern or practice of attempting to settle or set- tling claims for less than the amount that a reasonable per- son would believe the insured individual or his or her bene- ficiary was entitled by reference to written or printed adver- tising material accompanying or made part of an applica- tion. (1) Attempting to settle or settling claims on the basis o an application that was materially altered without notice to, or knowledge or consent of the insured. (J) Failing to provide forms necessary to present claims within 15 calendar days of a requests with reasonable ex- planations regarding their use. (K). Attempting to cancel a policy in less time than that prescribed in the policy or by the law of the primary State. (10) FRAUD AND ABUSE.-The term “fraud and abuse” means an act or omission committed by a person who, knowingly and with intent to defraud, commits, or conceals any material infor- mation concerning, one or more of the following: (A) Presenting, causing to be presented or preparing with knowledge or belief that it will be presented to or by an in- surer, a reinsurer, broker or its agent, false information as part of, in support of or concerning a fact material to one or more of the following: (i) An application for the issuance or renewal of an insurance policy or reinsurance contract. (ii) The rating of an insurance policy or reinsuranc COntract. (iii) A claim for payment or benefit pursuant to a insurance policy or reinsurance contract. (iv) Premiums paid on an insurance policy or rein- Surance COntract. (v) Payments made in accordance with the terms o an insurance policy or reinsurance contract. (vi) A document filed with the commissioner or th chief insurance regulatory official of another jurisdic tlon. (vii) The financial condition of an insurer or rein SULP'e?". (viii) The formation, acquisition, merger, reconsoli dation, dissolution or withdrawal from one or mor lines of insurance or reinsurance in all or part of State by an insurer or reinsurer. 41 (ix) The issuance of written evidence of insurance. (x) The reinstatement of an insurance policy. (B) Solicitation or acceptance of new or renewal insur- ance risks on behalf of an insurer reinsurer or other person engaged in the business of insurance by a person who knows or should know that the insurer or other person re- sponsible for the risk is insolvent at the time of the trans- action. (C) Transaction of the business of insurance in violation of laws requiring a license, certificate of authority or other legal authority for the transaction of the business of insur- OLI1, Cé. (D) Attempt to commit, aiding or abetting in the commis- sion of, or conspiracy to commit the acts or omissions speci- fied in this paragraph. SEC. 2796. APPLICATION OF LAW. (a) IN GENERAL.—The covered laws of the primary State shall apply to individual health insurance coverage offered by a health insurance issuer in the primary State and in any secondary State, but only if the coverage and issuer comply with the conditions of § section with respect to the offering of coverage in any secondary tate. (b) EXEMPTIONS FROM COVERED LAWS IN A SECONDARY STATE.— Except as provided in this section, a health insurance issuer with |...} to its offer, sale, rating (including medical underwriting), re- ewal, and issuance of individual health insurance coverage in any secondary State is exempt from any covered laws of the secondary State (and any rules, regulations, agreements, or orders sought or issued by such State under or related to such covered laws) to the extent that such laws would— (1) make unlawful, or regulate, directly or indirectly, the op- eration of the health insurance issuer operating in the sec- ondary State, except that any secondary State may require such an issuer— (A) to pay, on a nondiscriminatory basis, applicable pre- mium and other taxes (including high risk pool assess- ments) which are levied on insurers and surplus lines in- jº brokers, or policyholders under the laws of the tate; (B) to register with and designate the State insurance commissioner as its agent solely for the purpose of receiving service of legal documents or process; (C) to submit to an examination of its financial condition by the State insurance commissioner in any State in which the issuer is doing business to determine the issuer's finan- cial condition, if— (i) the State insurance commissioner of the primary State has not done an examination within the period recommended by the National Association of Insurance Commissioners; and (ii) any such examination is conducted in accordance with the examiners’ handbook of the National Associa- tion of Insurance Commissioners and is coordinated to avoid unjustified duplication and unjustified repeti- tion; 42 (D) to comply with a lawful order issued— (i) in a delinquency proceeding commenced by the State insurance commissioner if there has been a find- ing of financial impairment under subparagraph (C); Or (ii) in a voluntary dissolution proceeding; (E) to comply with an injunction issued by a court of competent jurisdiction, upon a petition by the State insur- ance commissioner alleging that the issuer is in hazardous financial condition; (F) to participate, on a nondiscriminatory basis, in any insurance insolvency guaranty association or similar asso- ciation to which a health insurance issuer in the State is required to belong; (G) to comply with any State law regarding fraud and abuse (as defined in section 2795(10)), except that if the State seeks an injunction regarding the conduct described in this subparagraph, such injunction must be obtained from a court of competent jurisdiction; (H) to comply with any State law regarding unfair claims settlement practices (as defined in section 2795(9)); Or (I) to comply with the applicable requirements for inde- pendent review under section 2798 with respect to coverage offered in the State; (2) require any individual health insurance coverage issued by the issuer to be countersigned by an insurance agent o broker residing in that Secondary State; or (3) otherwise discriminate against the issuer issuing insur ance in both the primary State and in any secondary State. (c) CLEAR AND CONSPICUOUS DISCLOSURE.-A health insuranc issuer shall provide the following notice, in 12-point bold type, i any insurance coverage offered in a secondary State under this par by such a health insurance issuer and at renewal of the policy, wit the 5 blank spaces therein being appropriately filled with the nam of the health insurance issuer, the name of primary State, the nam of the secondary State, the name of the secondary State, and th # a of the secondary State, respectively, for the coverage con Ce?"/262OL: “Notice “This policy is issued by and is governed by th laws and regulations of the State of , and it ha met all the laws of that State as determined by that State’ Department of Insurance. This policy may be less expensiv than others because it is not subject to all of the insuranc laws and regulations of the State of , includin coverage of some services or benefits mandated by the law o the State of . Additionally, this policy is not subjec to all of the consumer protection laws or restrictions on rat changes of the State of . As with all insuranc products, before purchasing this policy, you should carefull review the policy and determine what health care service the policy covers and what benefits it provides, including an 43 2xclusions, limitations, or conditions for such services or penefits.”. (d) PROHIBITION ON CERTAIN RECLASSIFICATIONS AND PREMIUM TNCREASES.— (1) IN GENERAL.—For purposes of this section, a health insur- ance issuer that provides individual health insurance coverage to an individual under this part in a primary or secondary State may not upon renewal— (A) move or reclassify the individual insured under the health insurance coverage from the class such individual is in at the time of issue of the contract based on the health- status related factors of the individual; or (B) increase the premiums assessed the individual for such coverage based on a health status-related factor or change of a health status-related factor or the past or pro- spective claim experience of the insured individual. (2) CONSTRUCTION.—Nothing in paragraph (1) shall be con- strued to prohibit a health insurance issuer— (A) from terminating or discontinuing coverage or a class of coverage in accordance with subsections (b) and (c) of Section 2742; (B) from raising premium rates for all policy holders within a class based on claims experience; (C) from changing premiums or offering discounted pre- miums to individuals who engage in wellness activities at intervals prescribed by the issuer, if such premium changes or incentives— (i) are disclosed to the consumer in the insurance contract; (ii) are based on specific wellness activities that are not applicable to all individuals; and (iii) are not obtainable by all individuals to whom coverage is offered; (D) from reinstating lapsed coverage; or (E) from retroactively adjusting the rates charged an in- sured individual if the initial rates were set based on mate- rial misrepresentation by the individual at the time of lSSUL6. (e) PRIOR OFFERING OF POLICY IN PRIMARY STATE.—A health in- urance issuer may not offer for sale individual health insurance goverage in a secondary State unless that coverage is currently of. fered for sale in the primary State. (f) LICENSING OF AGENTS OR BROKERS FOR HEALTH INSURANCE ISSUERS.—Any State may require that a person acting, or offering to act, as an agent or broker for a health insurance issuer with re- fººt to the offering of individual health insurance coverage obtain a license from that State, with commissions or other compensation subject to the provisions of the laws of that State, except that a State may not impose any qualification or requirement which discrimi- nates against a nonresident agent or broker. (g) DOCUMENTS FOR SUBMISSION TO STATE INSURANCE COMMIS- SIONER.—Each health insurance issuer issuing individual health in- surance coverage in both primary and secondary States shall sub- mit— 44 (1) to the insurance commissioner of each State in which it intends to offer such coverage, before it may offer individual health insurance coverage in such State— (A) a copy of the plan of operation or feasibility study or any similar statement of the policy being offered and its coverage (which shall include the name of its primary State and its principal place of business); (B) written notice of any change in its designation of its primary State; and (C) written notice from the issuer of the issuer's compli- ance with all the laws of the primary State; and (2) to the insurance commissioner of each secondary State in which it offers individual health insurance coverage, a copy o the issuer's quarterly financial statement submitted to the pri- mary State, which statement shall be certified by an inde- pendent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by— (A) a member of the American Academy of Actuaries; or (B) a qualified loss reserve specialist. (h) POWER OF COURTS TO ENJOIN CONDUCT.—Nothing in this section shall be construed to affect the authority of any Federal or State court to enjoin— (1) the solicitation or sale of individual health insurance cov- erage by a health insurance issuer to any person or group who is not eligible for such insurance; or (2) the solicitation or sale of individual health insurance cov- erage that violates the requirements of the law of a secondary State which are described in subparagraphs (A) through (H) o Section 2796(b)(1). (i) POWER OF SECONDARY STATES TO TAKE ADMINISTRATIVE AC- TION.—Nothing in this section shall be construed to affect the au- thority of any State to enjoin conduct in violation of that State's laws described in section 2796(b)(1). (j) STATE POWERS TO ENFORCE STATE LAWS.— (1) IN GENERAL.—Subject to the provisions of subsectio (b)(1)(G) (relating to injunctions) and paragraph (2), nothing i this section shall be construed to affect the authority of an State to make use of any of its powers to enforce the laws o such State with respect to which a health insurance issuer i not exempt under subsection (b). (2) COURTS OF COMPETENT JURISDICTION.—If a State seek an injunction regarding the conduct described in paragraph (1) and (2) of subsection (h), such injunction must be obtaine from a Federal or State court of competent jurisdiction. (k) STATES’ AUTHORITY TO SUE.—Nothing in this section shall af fect the authority of any State to bring action in any Federal o State court. (l) GENERALLY APPLICABLE LAWS.—Nothing in this section shal be construed to affect the applicability of State laws generally appli cable to persons or corporations. (m) GUARANTEED AVAILABILITY OF COVERAGE TO HIPAA ELIGI BLE INDIVIDUALS.—To the extent that a health insurance issuer i offering coverage in a primary State that does not accommodat residents of secondary States or does not provide a working mecha nism for residents of a secondary State, and the issuer is offerin 45 overage under this part in such secondary State which has not dopted a qualified high risk pool as its acceptable alternative mechanism (as defined in section 2744(c)(2)), the issuer shall, with espect to any individual health insurance coverage offered in a sec- Indary State under this part, comply with the guaranteed avail- ºbility requirements for eligible individuals in section 2741. SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR BEFORE ISSUER MAY SELL INTO SECONDARY STATES. A health insurance issuer may not offer, sell, or issue individual ealth insurance coverage in a secondary State if the State insur- nce commissioner does not use a risk-based capital formula for the etermination of capital and surplus requirements for all health in- urance issuers. EC. 2798. INDEPENDENT EXTERNAL APPEALS PROCEDURES. (a) RIGHT TO EXTERNAL APPEAL.-A health insurance issuer may lot offer, sell, or issue individual health insurance coverage in a econdary State under the provisions of this title unless (1) both the secondary State and the primary State have leg- islation or regulations in place establishing an independent re- view process for individuals who are covered by individual health insurance coverage, or (2) in any case in which the requirements of subparagraph (A) are not met with respect to the either of such States, the issuer provides an independent review mechanism substantially identical (as determined by the applicable State authority of such State) to that prescribed in the “Health Carrier External Review Model Act” of the National Association of Insurance Commissioners for all individuals who purchase insurance cov- erage under the terms of this part, except that, under such mechanism, the review is conducted by an independent medical reviewer, or a panel of such reviewers, with respect to whom the requirements of subsection (b) are met. (b) QUALIFICATIONS OF INDEPENDENT MEDICAL REVIEWERS.–In he case of any independent review mechanism referred to in sub- lection (a)(2)— (1) IN GENERAL.—In referring a denial of a claim to an inde- pendent medical reviewer, or to any panel of such reviewers, to conduct independent medical review, the issuer shall ensure that— (A) each independent medical reviewer meets the quali- fications described in paragraphs (2) and (3); (B) with respect to each review, each reviewer meets the requirements of paragraph (4) and the reviewer, or at least 1 reviewer on the panel, meets the requirements described in paragraph (5); and (C) compensation provided by the issuer to each reviewer is consistent with paragraph (6). (2) LICENSURE AND EXPERTISE.-Each independent medical reviewer shall be a physician (allopathic or osteopathic) or health care professional who— (A) is appropriately credentialed or licensed in 1 or more States to deliver health care services; and (B) typically treats the condition, makes the diagnosis, or provides the type of treatment under review. 46 (3) INDEPENDENCE.- (A) IN GENERAL.—Subject to subparagraph (B), each independent medical reviewer in a case shall— ºi) not be a related party (as defined in paragraph 7)); (ii) not have a material familial, financial, or profes- Sional relationship with such a party; and (iii) not otherwise have a conflict of interest with Such a party (as determined under regulations). (B) EXCEPTION.—Nothing in subparagraph (A) shall be construed to— (i) prohibit an individual, solely on the basis of af. filiation with the issuer, from serving as an inde- pendent medical reviewer if– (I) a non-affiliated individual is not reasonabl available; (II) the affiliated individual is not involved i the provision of items or services in the case unde review; (III) the fact of such an affiliation is disclosed t the issuer and the enrollee (or authorized rep resentative) and neither party objects; and (TV) the affiliated individual is not an employe of the issuer and does not provide services exclu sively or primarily to or on behalf of the issuer; (ii) prohibit an individual who has staff privileges a the institution where the treatment involved takes plac from serving as an independent medical reviewer mere ly on the basis of such affiliation if the affiliation i disclosed to the issuer and the enrollee (or authorize representative), and neither party objects; or (iii) prohibit receipt of compensation by an inde pendent medical reviewer from an entity if the com pensation is provided consistent with paragraph (6). (4) PRACTICING HEALTH CARE PROFESSIONAL IN SAME FIELD. (A) IN GENERAL.—In a case involving treatment, or th provision of items or services— (i) by a physician, a reviewer shall be a practicin physician (allopathic or osteopathic) of the same o similar specialty, as a physician who, acting within th appropriate scope of practice within the State in whic the service is provided or rendered, typically treats th condition, makes the diagnosis, or provides the type o treatment under review; or (ii) by a non-physician health care professional, th reviewer, or at least 1 member of the review panel shall be a practicing non-physician health care profes Sional of the same or similar specialty as the non-phy sician health care professional who, acting within th appropriate scope of practice within the State in whic the service is provided or rendered, typically treats th condition, makes the diagnosis, or provides the type o treatment under review. (B) PRACTICING DEFINED.—For purposes of this para graph, the term “practicing” means, with respect to an indi 47 vidual who is a physician or other health care professional, that the individual provides health care services to indi- vidual patients on average at least 2 days per week. (5) PEDIATRIC EXPERTISE.-In the case of an external review relating to a child, a reviewer shall have expertise under para- graph (2) in pediatrics. (6) LIMITATIONS ON REVIEWER COMPENSATION.—Compensa- tion provided by the issuer to an independent medical reviewer in connection with a review under this section shall— (A) not exceed a reasonable level; and (B) not be contingent on the decision rendered by the re- viewer. (7) RELATED PARTY DEFINED.—For purposes of this section, the term “related party” means, with respect to a denial of a claim under a coverage relating to an enrollee, any of the fol- lowing: (A) The issuer involved, or any fiduciary, officer, director, or employee of the issuer. (B) The enrollee (or authorized representative). (C) The health care professional that provides the items or services involved in the denial. (D) The institution at which the items or services (or treatment) involved in the denial are provided. (E) The manufacturer of any drug or other item that is included in the items or services involved in the denial. (F) Any other party determined under any regulations to have a substantial interest in the denial involved. (8) DEFINITIONS.—For purposes of this subsection: (A) ENROLLEE.—The term “enrollee” means, with respect to health insurance coverage offered by a health insurance issuer, an individual enrolled with the issuer to receive such coverage. (B) HEALTH CARE PROFESSIONAL.—The term “health care professional” means an individual who is licensed, accred- ited, or certified under State law to provide specified health care services and who is operating within the scope of such licensure, accreditation, or certification. EC. 2799. ENFORCEMENT. (a) IN GENERAL.—Subject to subsection (b), with respect to specific naividual health insurance coverage the primary State for such overage has sole jurisdiction to enforce the primary State's covered aws in the primary State and any secondary State. (b) SECONDARY STATE'S AUTHORITY..—Nothing in subsection (a) hall be construed to affect the authority of a secondary State to en- orce its laws as set forth in the exception specified in section !796(b)(1). (c) COURT INTERPRETATION.—In reviewing action initiated by the pplicable secondary State authority, the court of competent juris- liction shall apply the covered laws of the primary State. (d) NOTICE OF COMPLIANCE FAILURE.-In the case of individual wealth insurance coverage offered in a secondary State that fails to omply with the covered laws of the primary State, the applicable 48 State authority of the secondary State may notify the applicable State authority of the primary State. >}: :: >{< :: :: >{: :: MISSENTING VIEWS OF REPRESENTATIVES DINGELL, WAX- MAN, MARKEY, TOWNS, PALLONE, BROWN OF OHIO, GOR- DON, RUSH, ESHOO, STUPAK, ENGEL, WYNN, GENE GREEN OF TEXAS, STRICKLAND, DEGETTE, CAPPS, DOYLE, ALLEN, DAVIS, SCHAKOWSKY, SOLIS, GONZALEZ, INSLEE, BALDWIN, AND ROSS H.R. 2355, the “Health Care Choice Act of 2005”, is a serious reat to the individual health insurance market. This legislation ould allow health insurance companies to be licensed in one State ut then sell policies in any of the other 49 States without meeting e other State's consumer protection and insurance laws. Demo- ats strenuously objected to the legislation on a number of rounds and offered a series of amendments to correct its funda- ental flaws. Xrosion of consumer protections One of the most serious concerns with this legislation is that it would erode State consumer protections. States would be powerless o stop out-of-State insurance companies from selling coverage in heir State which did not meet important State consumer and ben- fit protections. The legislation would undermine access to coverage nd benefits for all consumers in the individual insurance market, nd it would particularly hurt those with either existing medical leeds, such as diabetics, cancer patients, pregnant women, and sthmatics, or those who develop a need for care. It would allow nsurers to craft policies that serve only the healthy and avoid the ick either by excluding them outright from coverage or by pricing olicies out of reach. Numerous advocacy groups expressed concerns with H.R. 2355. The American Diabetes Association indicated: “The Association is oncerned that by permitting insurers to be licensed in only one state, H.R. 2355 could cause the end of guaranteed-issue individual lealth insurance policies. Many people with diabetes rely on this ype of policy when employers do not offer coverage, or when they re self-employed. Under these policies, consumers can never be urned down for health insurance coverage because of their health tatus. However, insurers in other States without these types of provisions can and usually do deny coverage to individuals with di- betes because of their pre-existing condition.” " In a letter to Representative Ted Strickland on H.R. 2355, the National Mental Health Association noted: “As you know, mental |lnesses are the leading cause of disability and premature death n this country. Absent strong laws, discriminatory health-insur- ince practices that limit people's access to needed mental health 1 June 24, 2005, letter from the American Diabetes Association to Representative John B. hadegg. (49) 50 care are widespread across the country. Enactment of this legisla tion would, in our view, be a setback for many people with menta illnesses who have won protections against such discriminatio under State laws.”? The March of Dimes stated in testimony submitted to the Com mittee: “We have strong reservations about any proposal tha would have the effect of putting at risk existing State coverage pr tections for pregnant women, infants and children. In our jud ment, health insurers should not be allowed to sell coverage tha excludes maternity and pediatric benefit protections approved b individual States. As illustrated by experience with maternity co erage in the individual insurance market, permitting exclusion basic benefits can have the perverse result of making such benefit unaffordable or even unavailable.”3 FamiliesDSA said: “Under the Health Care Choice Act, th rights and protections granted by many States will be undercut b a small number of States that have fewer—or no—protections.”4 The National Partnership for Women and Families stated: “In surers could select the State with the most lenient rules, and ther by circumvent State laws that protect consumers from unfair rate and rate hikes. These insurers would be exempt from critical co Sumer protections such as guaranteed coverage for individual wit preexisting conditions, and required coverage of critical health be efits like mammography screenings and preventive care.” In an effort to protect such individuals from harm under this le islation, Democrats offered a number of amendments that woul have prohibited insurers from discriminating against these group by excluding needed benefits or excluding them from coverag Amendments were offered that would require insurers operating i a State to comply with that State's laws regarding access to co erage and benefits for individuals with diabetes, mental illness, p diatric cancer, and breast cancer, as well as to protect access an benefits for pregnant women and children. Amendments were als offered to protect State laws regarding access to prescription dru coverage and ensuring access to immunizations for children. Unfo tunately, all of these amendments were defeated by the Majorit Creation of a regulatory void; increase in fraud The bill would strip regulatory authority from State insuranc commissioners and prevent them from protecting residents of thei State from unlicensed insurance companies. Section 2976 exempt a health insurer from complying with the covered laws of a Stat such as consumer protections (i.e., access to emergency care, acces to specialty care); benefit protections (i.e., diabetes coverage, mate nity coverage, mental illness coverage, etc.); protections on pr miums that can be charged; fraud and abuse laws (other tha those that meet the narrow definition of fraud and abuse in th 2 July 19, 2005, letter from Michael Faenza, National Mental Health Association, to Re; resentative Ted Strickland. 3 March of Dimes testimony submitted to the Committee on Energy and Commerce on H.] 2355, June 28, 2005. 4 Statement of Ron Pollack on H.R. 2355, the “Health Care Choice Act” for the record befol the Committee on Energy and Commerce, June 28, 2005. 5 Statement of the National Partnership of Women and Families on H.R. 2355, “Nation. Health Care Advocate Opposes the Health Care Choice Act”, June 28, 2005. 51 'gislation); protections on access to coverage (i.e., guarantee issue nd renewability, pre-existing condition protections); and other aws relating to insurance. For these laws, if a consumer had a roblem with an unlicensed insurance policy, he or she would have ) request that an out-of-State insurance commissioner take action, that other State even had such protections. The insurance com- missioner in the consumer's home State could not assist them. Democrats offered a number of amendments to address this mat- ar including: requiring the State insurance commissioners to cer- ify that a policy licensed in another State would not cause harm in-State consumers before such a policy could be sold in the tate; allowing a State to enforce laws against an unlicensed insur- nce plan if the licensing State did not take action; and allowing State to ban unlicensed bad actors from the State if the company as found to violate required laws. All of these amendments were efeated on near party-line votes. The removal of regulatory oversight by this legislation will pro- ide an environment ripe for unscrupulous actors to enter States nd defraud consumers. Rather than simplify insurance regulation, his legislation would make it more complex because of the varying ſtate and Federal standards that would apply to companies oper- ting without being licensed in that State. The insurance laws of he State where the company is licensed would apply in most in- tances, but in some instances, such as in the case of certain fraud aws or external appeals, the State laws where the consumer lives would apply. In other cases, a Federal standard would apply. For ...; there is a Federal standard for premium reclassifications, nforced by the licensing State, and a Federal standard for external ppeals in instances where a State has no policy, enforced by that State. Consumers would be required to sort through the different layers f regulation to determine to whom and where certain provisions pplied and where they would go to enforce them. Today, con- umers know to turn to their State office for assistance. Under this agislation, insurers could frequently change the State in which hey are licensed. Consumers would have to canvass different states to find out where their policy was regulated at the time heir problem occurred. Moreover, having to navigate a State insur- ince department hundreds of miles away in another State would reate significant obstacles for consumers seeking to file com- laints. Thus, the legislation establishes operational and practical arriers to filing and investigating complaints. The end result would likely be little oversight of insurers. Moreover, State insurance departments are not equipped to serve esidents of other States. In addition, State insurance departments lo not have the resources to enforce or even monitor the conduct f insurance companies beyond its borders in a State where the in- urer is not licensed. Under this legislation many consumer com- laints or problems would go unaddressed and insurance compa- lies would get away with bad practices with no consequences. nsufficient consumer information Adding to Democrats’ concerns about fraud is the lack of infor- nation required to be provided to consumers about the policies li- 52 censed in another State they would be purchasing. The legislation at section 2976(c), requires a brief notice to be provided to con Sumers indicating which State laws and regulations govern tha policy. Democrats offered an amendment to improve the informa tion provided to consumers by insurance companies in order to en sure that individuals were making an informed choice in pur chasing a policy not licensed and regulated primarily by thei State. The amendment would have required insurers offering coverag in a State where they were not licensed to provide an explanatio in easy to understand language of any variance of that policy from the mandated benefits, consumer protections, fraud protections, o premium protections that would be provided under the State's law where the insurer is not licensed that would not apply. In addition the amendment would have required that each time an insure changed the State in which it was licensed, it must notify polic holders in writing of the change, and must include a summary C any material changes in law and regulation between the old an new primary jurisdiction as well as where to contact in the Stat where the plan is licensed to file a complaint. Finally, the amendment would have required insurers to main tain a website (and provide information in each policy on how t access that site) containing: (1) copies of each insurance policy form sold in other States where it was not licensed; (2) copies of or link to the insurance law and regulation used in the State where it wa licensed; (3) a discussion of the rating approach used by the licens ing State including whether it varies by duration and how it ap proaches closed blocks of business; and (4) information on how th applicant or policy holder can file a complaint with the insuranc regulator of the licensing State. This amendment, like all othe Democratic amendments, was defeated. Erosion of choice H.R. 2355 is likely to lead to an erosion of choice for consumer as a result of a number of different factors. Insurance companie that currently offer more diverse policies including broader benefit and using less restrictive underwriting rules would find it difficul to continue offering that coverage as unlicensed out-of-State insul ers moved into the market. These out-of-State policies would s phon off the healthy “good risks” into bare-bones policies, raisi costs in more comprehensive health insurance policies. Ultimatel this would create a competitive disadvantage for any insurer th wished to (or was required by law to) meet more comprehensi State consumer protection standards. Consumers would find th policies that offered more comprehensive coverage and protectio were no longer available or were unaffordable. To address this matter, Democrats offered an amendment whic would require any insurer wishing to offer a policy in a Sta where it was not licensed (and thus did not meet the States co sumer protections, benefit protections, access, rate or other require ments) to also offer a second policy that did meet all of the Sta standards. This would ensure that consumers were, in fact, able t decide which type of policy best met their needs by guaranteein 53 hat both State-regulated and out-of-State unlicensed policies were ffered to consumers. The amendment was defeated. visceration of State legislative authority Because this legislation would allow insurance companies to cir- Imvent State laws by operating without a license in that State, , usurps the legislative authority of State legislatures. By allowing nsurance companies to choose which State to be licensed in, this >gislation would block the ability of State legislatures to enact aws that had stronger protections than those of another State. here would be no incentive for States to pass laws to protect resi- nts if the insurer could just register elsewhere to avoid it. Rather an foster a climate of continual improvement in industry prac- ces, it would encourage companies to choose as its primary State e one with the lowest standards. Democrats objected to the Fed- al Government supplanting State powers in this manner, particu- rly as the end result would be fewer protections for consumers. * ºdment to return authority to State legislatures was also efeated. ummary In short, we have grave reservations about H.R. 2355 and its ef- *ct on millions of Americans who obtain their health coverage in heir State's individual health insurance market. This bill, which as brought directly to the full Committee for consideration after nly one hearing in the Subcommittee on Health, clearly would llow health insurance companies to avoid important State con- umer protections and as such avoid serving individuals with med- :al needs. The legislation also sets up a confusing and inadequate 2gulatory structure that is certain to lead to an increase in fraud- lent health insurance companies operating across the Nation. tates, under the legislation, will have little ability to enforce their aws for their residents against plans operating without a license n that State. And, licensing States will not have the resources or otentially even the desire to assist out-of-State consumers experi- ncing problems with an out-of-State insurance company. For all of these reasons, we strongly oppose this legislation. JOHN D. DINGELL. HENRY A. WAXMAN. EDWARD J. MARKEY. EDOLPHUS TOWNS. FRANK PALLONE, Jr. SHERROD BROWN. BART GORDON. BOBBY L. RUSH. ANNA. G. ESHOO. BART STUPAK. ELIOT L. ENGEL. ALBERT R. WYNN. GENE GREEN. TED STRICKLAND. DIANA DEGETTE. LOIS CAPPS. MICHAEL F. DOYLE. 54 TOM ALLEN. JIM DAVIS. JAN SCHAKOWSKY. HILDA L. SOLIS. CHARLES A. GONZALEZ. JAY INSLEE. TAMMY BALDWIN. MIKE ROSS. O UNIVERSITY OF MICHIGAN iii. 3 3 9015 08543 3608 |